Fonterra boosts earnings
Benefiting from essential status through New Zealand’s COVID-19 lockdown, dairy cooperative Fonterra has posted a bumper third-quarter earnings result.
The joint-listed export giant believes it will pay a dividend to shareholders this year and can get through the coronavirus-induced recession without layoffs.
On Thursday morning, chief executive Miles Hurrell announced a $NZ815 million ($A759 million) EBIT to April 30, up more than a third on last year’s similar result.
“The work done over the last year to strengthen our balance sheet, and the Co-op’s ability to respond quickly has helped us manage the COVID-19 situation over the last few months,” Hurrell said.
“We’re drawing on our global supply chain and ability to flex and move our farmers between products and markets as required.”
The full-year earning guidance is 15-25 NZ cents (14 to 23 A cents) per share.
“And we expect to be in the top half of that range,” Hurrell said in an investors call.
Agriculture was labelled essential during New Zealand’s lockdown and was one of the few industries able to keep doors open.
“Our businesses continued to operate at 100 per cent through COVID on a global basis and the ability for us to collect, process and distribute and sell milk has been a real strength of ours,” he said.
“We have no intention of reducing or changing staff numbers.”
Hurrell said ingredients (up nine per cent to $NZ668 million), consumer (up 46 per cent to $NZ187 million) and food service (up 54 per cent to $NZ208 million) divisions grew their earnings despite COVID-19 hits.
“In China, the food service sector started its recovery relatively quickly, although it is still not at 100 per cent,” Hurrell said.
“We saw our sales in China fall in February, but they bounced back to more normal levels in March and this continued in April.”
The joint-listed company is continuing to reduce debt, and is on track to deliver its hefty gross margin target “with gross margin up $NZ244 million on last year to $NZ2.5 billion”.
While this year’s farmgate milk price has been set at $NZ7.10 to $NZ7.30, next year’s price has been windowed at $NZ5.40 to $NZ6.90 per kgMS due to worsening global prices.