Fonterra profits more than double

By Jim Cornall

- Last updated on GMT

Fonterra announced increased profits and an increase in its dividend for farmers
Fonterra announced increased profits and an increase in its dividend for farmers

Related tags Dairy cooperative fonterra Milk Fonterra

New Zealand dairy cooperative Fonterra has announced its first half results for the six months ending January 31, 2016.

In its performance review, Fonterra says that profit after tax more than doubled to NZ$409m ($274m).

Chairman John Wilson said current low prices have placed a great deal of pressure on incomes, farm budgets, and farming families.

“Our management is aware of the need for strong performance to ensure that we get every possible cent back into farmers’ hands during a very tough year,”​ Wilson said.

He added that as a result of the profits, Fonterra has delivered an interim dividend of NZ$0.20 per share ($0.13), up from an interim dividend for last year of NZ$0.10 ($0.067) per share.

“Our forecast total dividend for the current financial year is NZ$0.40 ($0.27) per share.”

Business Performance

Chief executive Theo Spierings said, “We focused on the efficiency of our ingredients business and capturing demand for ingredients in a wide range of markets.

“We aimed to make the most of global consumption growth by building demand for higher-value products in our consumer and foodservice markets.”

“In consumer and foodservice we have delivered very good growth, with normalized EBIT increasing 108% to NZ$241m ($161m),”​ he added.

“We remain focused on growing demand, especially in the eight markets where we currently hold or want to gain leadership or a very strong position: New Zealand, Australia, Sri Lanka, Malaysia, Chile, China, Indonesia and Brazil. These are well established markets for Fonterra, so we are working off a strong base.

“The additional 235m liters of milk we converted into higher-returning consumer and foodservice products in this six month period built on the additional 600m liters last year.”

Prices set to rise in late 2016

Current global economic conditions remain challenging and are impacting dairy demand and prices, said Spierings.

While he blamed lower imports into Russia and China, and European milk production increases for the imbalance between exports and imports, Spierings said prices are expected to rise later in 2016.

“The long term fundamentals for global dairy are positive with demand expected to increase by 2% to 3% a year due to the growing world population, increasing middle classes in Asia, urbanization and favourable demographics,”​ he said. 

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