The world’s biggest dairy exporter Fonterra Co-operative Group has reported half year net profit of NZ$80 million ($54.8 million), following a loss of NZ$348 million a year ago when it booked a writedown on its stake in Chinese infant formula company Beingmate.
However, the New Zealand dairy co-operative said that it remains under pressure from a challenging environment in Australia.
“While it is good to see the cooperative back in the black, the cooperative’s earnings performance is not where it should be,” said Fonterra chief executive Miles Hurrell.
Revenue for the period fell 1 per cent to NZ$9.7 billion, with the company pointing to the drought in Australia, resulting in lower milk collections and strong price competition.
“Our three-point plan involves taking stock of our business and conducting a portfolio review, getting the basics right and improving our forecasting. We’ve made good progress so far and we will continue to take these steps in the second half to firm up our foundations and strengthen our balance sheet,” Hurrell added.
“The second half will also see us continuing the work on developing a new strategy to support a much-needed change in direction. We are doing the right things but it’s clear more is needed to lift our performance. We need to simplify and improve the Co-op so we can grow value.”
The dairy giant said it has begun a sale process for its 50 per cent share in DFE Pharma, a joint venture with Dutch cooperative FrieslandCampina.
“Together with our partner, we have grown DFE Pharma from relatively small beginnings into a significant and successful business. While continuing to perform well, ownership of DFE is not core to our strategy.”
The Co-op also said it has received strong interest in Tip Top and is “actively considering its options” for its shareholding in Beingmate.