New Zealand dairy giant attributes ‘ocean of milk’ supply to pressuring global commodity prices.
Source: Fonterra news release
New Zealand dairy giant Fonterra Co-operative Group
today announced a payout of $6.40 for its farmer-members for the 2012 year, down 19% from the prior year.
The result includes a lower Farmgate Milk Price of $6.08 per kilogram of milksolids (kgMS), down from $7.60 last year, reflecting lower commodity prices and a strong New Zealand dollar. A dividend of 32 cents per share has been announced, with retentions of 10 cents per share.
Announcing the result, Fonterra Chairman Sir Henry van der Heyden said the 2012 year had been one out of the box for dairy: “All around the world, we saw record dairy production which was mirrored back here in New Zealand. Global dairy demand held up reasonably well but this ocean of milk obviously impacted on global commodity prices, with the Global Dairy Trade (GDT) index reaching its lowest value in 34 months in May.”
This contributed to a lower Farmgate Milk Price in the 2012 year. Much higher volumes of milk produced helped soften the impact of the decline of overall earnings for Fonterra’s farmers, added van der Heyden.
Fonterra Chief Executive Theo Spierings said the Co-operative had posted a strong operating performance, with normalised earnings of NZ$1.03 billion for the 2012 year, up 2% on the prior year.
Profit before tax was up 9% on the prior year and net profit after tax was $624 million, down 19%, largely due to tax credits of $202 million in the prior year not repeated in the current year. Excluding those credits, Fonterra’s net profit after tax improved by 10%.
Results highlights compared to the prior year include:
• Record New Zealand milk flows, up 11% to 1,493m kgMS in the current season;
• 11% increase in export volumes to 2.32 million metric tonnes (MT);
• Sales volumes increased 2% to 3.94 million MT;
• Flat revenues of $19.8 billion;
• Higher operating cash flows of $1.4 billion, up $206 million;
• Balance sheet strengthened with economic gearing ratio improving from 41.8% to 39.1%.
Spierings said the result showed Fonterra’s success in growing both volumes and value.
“The hard work of our farmers in producing record milk flows was matched by the efforts of the business in processing, selling and shipping these higher volumes, while also managing inventory levels,” said Spierings. “We know volatility is here to stay and we showed our ability to manage this volatility by adding value to our products, generating prices above GDT.”
The farmer-owned New Zealand co-operative is the largest processor of milk in the world, producing more than 2 million tonnes of dairy ingredients, value added dairy ingredients, specialty ingredients and consumer products every year.