Fonterra reports 'strong' H1 performance on back of Asia, Latam sales growth

By Mark ASTLEY contact

- Last updated on GMT

Related tags: Milk, United states, Latin america

Fonterra reports strong H1 performance
Fonterra has reported an earnings before interest and tax (EBIT) increase of more than 25% for the first half of fiscal year (FY) 2013 – a result it has attributed to sales volume growth from its NZ Milk Products business, Asia, and Latin America.

The New Zealand-based dairy exporter reported normalised earnings before interest and tax (EBIT) of NZ$693m ($579m, €453m) for the first half of FY 2013 – a 26% increase on the corresponding period in FY 2012.

The dairy cooperative, which acquires and processes around 90% of the milk produced in New Zealand, has attributed this increase in-part to sales volume growth from its brands in Asian and Latin America and its NZ Milk Products brand.

NZ Milk Products reported normalised EBIT of NZ$422m ($352m, €276m) for the period – a 65% increase on the NZ$225m ($188m, €147m) reported in the first half of the last fiscal year.

Normalised EBIT from Asia, Africa, and the Middle East increased 27% to NZ$100m ($84m, €65m) – a result Fonterra has attributed to its foodservice and consumer brands across China, Indonesia, Malaysia, Vietnam and the Middle East.

While in Latin America, sales volume increased 11% on the back of growth across all fresh dairy product categories. Normalised EBIT for the Latin American region increase 5% to NZ$67m ($56m, €44m).

Australian “recovery plan” in place

Meanwhile, Fonterra’s Australia-New Zealand business reported a 32% decrease in normalised EBIT on the back of a poor Australian performance and the costs associated with the closure of its Cororooke site.

“While our consumer business performance in New Zealand was slightly better than last year, Australia’s consumer business had to contend with a very competitive retail environment,”​ said Fonterra CEO, Theo Spierings.

“Meanwhile, the ingredients business experienced a significant margin squeeze as the competition for milk supply in Australia intensified.”

“A recovery plan is now in place, with the planned closure of our Cororooke site, continuing rationalisation of the brands portfolio, and cost reductions following a recent restructure of the business,” ​said Spierings.

"Intensified competition” expected in H2

Looking ahead to the remainder of the H2, Spierings predicted that a repeat of the performance witnessed in H1 is unlikely.

“For the full year, we expect to see total milk volumes for the current season to be in line with last season,”​ he said.

“The on-going volatility in commodity markets could have a negative impact on product mix profitability.”

“In many of our consumer markets, we are expecting intensified competition in the second half – particularly in Australia – and in Asia we are seeing signs of demand slowing," ​said Spierings.

Related topics: Business, Oceania, Dairy

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