Crying over spilt milk
NZ dairy giant records its first loss
A NEW Zealand dairy heavyweight with extensive operations in Australia has tumbled to its first full-year loss.
Fonterra has posted a net loss of $NZ196 million ($179 million) for the year to July — the first full-year loss in its 17year history.
The co-operative, owner of brands including Western Star butter, Anchor milk and Mainland cheese, had posted a $NZ734 million profit the previous year.
But in March it reported a first-half loss for the first time after a major writedown on a Chinese investment and a compensation payment over a 2013 botulism scare.
Fonterra yesterday said its underlying earnings, which excludes one-off items, fell 22 per cent before interest and tax to $NZ902 million.
It came as revenue increased slightly, to $NZ20.4 billion, but the group’s profit margins were squeezed.
Fonterra is a major player in the Australian market, where it sells products under its own brands but is also a key milk supplier. In Victoria, it supplies house-brand milk for Woolworths.
Farmers and key shareholders said they were “extremely” disappointed.
“There’s no two ways about it, these results don’t meet the standards we need to live up to,” Fonterra interim chief executive Miles Hurrell said.
“We expected our performance to be weighted to the second half of the year.
“We needed to deliver an outstanding third and fourth quarter, after an extremely strong second quarter for sales and earnings — but that didn’t happen.”
The company this year wrote $NZ439 million off a troubled $NZ750 million investment in Chinese food company Beingmate.
It also paid out $NZ232 million to French food titan Danone after arbitration over the recall of products in the 2013 botulism scare.
But Mr Hurrell said even without those one-offs, there were other areas of difficulty, including overly optimistic forecasting, high butter prices, increased farmgate milk prices — the prices paid to farmers — and increasing expenses in parts of the businesses.
The company issued a four-point plan to improve its performance with the results yesterday, saying it would start with a review of its Beingmate investment.
Fonterra — which accounts for about 30 per cent of the world’s dairy exports — has been searching for a replacement for chief executive Theo Spierings, who announced in May he would be stepping down.
The chair, John Wilson, quit in July following a health scare.
New Zealand’s Federated Farmers lobby group said it hoped their replacements would do better job after a “very disappointing” result.
THERE’S NO TWO WAYS ABOUT IT, THESE RESULTS DON’T MEET THE STANDARDS WE NEED TO LIVE UP TO. FONTERRA’S MILES HURRELL