Fonterra back in the black by $80 million
Fonterra, New Zealand’s largest company, has posted an after-tax profit of $80 million for the six months to January 31, after its first ever loss last year.
Chief executive Miles Hurrell said the dairy giant was still not performing as well as it should, although it was on track to reduce end-of-year debt by $800m.
Last year New Zealand’s largest company suffered a $186m loss, in part thanks to a partial write-off of its investment in Chinese company Beingmate and a court penalty of $183m to French company Danone.
Hurrell said a third asset would be sold, after the recent announcements of the sales of Tip Top and options for its shareholding in Chinese company Beingmate.
Fonterra has started a sales process for its 50 per cent share of DFE Pharma, a joint venture established in 2006 between Fonterra and FrieslandCampina. DFE Pharma is one of the largest suppliers of pharmaceutical bulking agents in medicines such as tablets and powder inhalers.
‘‘At the same time, we have confirmed that we are committed to maintaining our lactose service and supply agreements from Fonterra’s Kapuni operation in Taranaki and supporting the ongoing operations of the DFE Pharma business.
‘‘Together with our partner, we have grown DFE Pharma from relatively small beginnings into a significant and successful business. While continuing to perform well, ownership of DFE is not core to our strategy,’’ Hurrell said.
Fonterra has received strong interest in Tip Top and is actively considering options for its shareholding in Beingmate.
Federated Farmers dairy chairman Chris Lewis said the results for Fonterra’s value-add business mirrored those of other dairy companies.
‘‘They’re struggling, the margins are down and the profitability isn’t quite there yet. But they’ve put out a clear announcement with a reasonable plan ahead.
‘‘Farmers might not be totally happy with the results, but they can take some comfort from the fact Fonterra is working hard on turning things around,’’ Lewis said.
Hurrell said Fonterra had sold its interest in its Venezuelan consumer joint venture, Corporacion Inlaca, to Mirona, an international food business, for $16m. The decision to sell was because of instability in Venezuela which had led to ‘‘challenging operating conditions’’.
The full impact of the sale, including the devaluation of the Venezuelan currency which has resulted in a negative foreign currency translation reserve balance of about $126m, would be reflected in the profit and loss statement.
This sale is not directly included in the half-year results, but it would have an 8 cents a share negative impact on earnings.
The New Zealand ingredients business in the first half of the year had performed well but this had been offset by challenges in Australia.