Fonterra earnings tipped for major hit
As Fonterra braces for a profit drop or even a potential loss, it is looking to fresh faces to turn around its financial performance.
In its 17-year history, the dairy giant has never experienced an annual loss. The half-year loss of $348 million it posted in March was a first.
Analysts predict a major profit tumble when interim chief executive Miles Hurrell and chairman John Monaghan announce the annual results tomorrow.
‘‘It’s likely to be a pretty weak result given they’ve had to strengthen their balance sheet by reducing the milk price and the dividend,’’ ASB analyst Nathan Penny said.
A month ago Fonterra reduced last season’s farmgate milk price to $6.70 per kilogram of milksolids from $6.75/kg, after placing shares in a trading halt.
At the same time it reduced the full-year dividend to just the 10 cents already paid in April. Its unit price has fallen 25 per cent since January to $5.01.
Forsyth Barr head of research Andy Bowley said his analyst team was forecasting an earnings downgrade.
‘‘We’re expecting Fonterra to report net earnings of around half of what was generated last year, given significant margin pressure across the business.’’
Last year Fonterra recorded a $745m profit, but in March reported a $348m loss for the first half of the year.
That result followed a writedown of $405m in its Beingmate investment and the payout of $183m to global infant formula maker Danone for the 2012 botulism scare.
Amid calls for a restructure and new leadership, chief executive Theo Spierings stepped down in mid-August to be replaced by Hurrell, while chairman John Wilson left for health reasons.
Meanwhile, Fonterra’s board has backed Zespri chairman Peter McBride as one of the independent candidates for its board elections in November.
Maori Television chairman Jamie Tuuta joins McBride as two nominees who would be newcomers to the board if elected.
The third independent candidate is Moa Brewing chairman Ashley Waugh, who has been a director since 2015.
The three nominees have been recommended by an independent selection panel and their nomination was also supported by the Fonterra Shareholders’ Council.
Two sitting directors – Wilson and Nicola Shadbolt – will leave the board in November.
Farmers can stand as selfnominated candidates but need to have the support of 35 shareholders.
Nominations close on September 20. The full list of candidates will be announced on September 24.