Fonterra cuts 200 jobs, lifts forecast

Dairy giant Fonterra has trimmed 200 jobs from its global operations as it continues to tighten its belt.

The job losses were revealed following the co-op’s first quarter update, during which it lifted its farmgate milk price forecast for 2020 to $7.30 per kg of milk solids, an increase of 25 cents.

They were not related to the sale of Tip Top icecream or the closure of the co-op’s Dennington plant in Australia, which were completed in the previous financial year, chief executive Miles Hurrell said.

The co-op had been through a ‘‘significant reset’’ and while some of the job losses came through redundancy, other roles were left vacant when staff moved on.

Worldwide, Fonterra has about 22,000 staff.

In September, it announced 65 jobs would go with the closure of the Paraparaumu speciality cheese plant, north of Wellington, although 34 new jobs will be created at Eltham, in Taranaki.

In the 2018 financial year, 708 staff earning over $100,000 had left the company compared with 230 the year before, and bonuses and pay rises had been cut.

At the first quarter update yesterday, chairman John Monaghan said the co-op was taking the mid-point of its forecast range of $7.00 to $7.60 per kg/MS.

‘‘The higher price reflects a global dairy market that is tipped slightly in favour of demand,’’ he said.

The price is likely to be some relief after a very difficult year for Fonterra, including a $605 million full year loss announced in September.

Last year’s final farmgate milk price for the season was $6.35 per kg of MS.

Fonterra’s turnaround strategy in recent months has included selling off several key businesses, including Tip Top in May for $380m and its half stake in DFE Pharma, which it sold for $633m in September.

It has also wound back its relationship with Chinese partner Beingmate and is looking to reduce its stake.

Monaghan said farmers would welcome ‘‘what would be the fourth highest milk price in our history. It represents a $11.2 billion cash injection into our communities’’.

New Zealand production was likely to be up 0.5 per cent on last year, at a time when other key supply regions in the US and EU were growing less than 1 per cent, Monaghan said.

‘‘On the demand side, Global Dairy Trade prices have increased by about 6 per cent since our previous forecast. Whole milk powder prices, a key driver of our milk price, have hit their highest level since December, 2016.’’

Fonterra chief executive Miles Hurrell said the co-operative had had a strong first quarter and was making good progress.

It would continue reducing debt with further cuts to operating spending, a $100m drop in capital expenditure to $500m, and more asset sales.