'Record' results see Fonterra secure ingredients for overseas success

By Ben Bouckley

- Last updated on GMT

Related tags Business Fonterra

Improved performance within Fonterra’s ingredients businesses worldwide has seen the firm announce a record turnover of NZ $19.9bn (€11.6bn) in 2010/11.

The New Zealand dairy giant said that a “bumper year”​ for dairy exports and strong contributions from its overseas ingredients businesses had boosted Fonterra’s earnings for the year ending July 31.

Financial highlights included a 13 per cent increase in profits after tax for the year to NZ $771m (€448m), while dairy exports totalled 2m tonnes.

Improved ingredients exports to over 100 markets, especially across Asia and the Middle East, drove growth, said Fonterra. However, consumer business profits slumped in New Zealand and Australia due to tough market conditions.

Fragile global economy

Fonterra ceo Andrew Ferrier said Fonterra achieved its net profit increase despite paying its farmer shareholders 29 per cent more for milk supplied.

Ferrier said: “Although the business was impacted by higher dairy ingredient prices and a fragile global economy, our underlying profitability showed solid growth over last year due to improvements within our ingredients businesses and the strength of our consumer brands.”

Earnings from Fonterra’s standard and premium ingredients stable were up 26 per cent on 2009/10, which the firm hailed as a “positive result”​ given much higher milk prices at the farm gate.

This earnings growth reflected improved efficiencies in the manufacturing and supply chain, Ferrier said, as well as refinements to the company’s product mix and growth in higher-margin premium ingredients.

Fiercely competitive market

But despite record consumer business revenues of $6.1bn (€3.54m), rising commodity prices had damaged margins, Fonterra said.

Ferrier described Asia/Africa and the Middle East, where earnings rose 12 per cent, as the “standout consumer business segment”​, with Fonterra focused on sales of power brands Anchor, Anlene and Anmum within the retail and foodservice sectors.

But earnings fell 17 per cent in Australia/New Zealand due to a “fiercely competitive market environment that made it harder to reflect fully, higher commodity prices in consumer pricing”.

Fonterra's said its Latin America segment, comprising Soprole in Chile and the Dairy Partners Americas joint ventures with Nestlé across key markets, had another "solid year",​ with normalised earnings unchanged from the prior year.

The company said its new ceo Theo Spierings would take up his new role on September 26 this year, succeeding Ferrier who announced that he was stepping down in March.

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