Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
The co-op's farmer shareholders will also receive a higher advance rate, a percentage of the forecast farmgate milk price paid on actual milk volume collected each month.
Fonterra’s new forecast range is $7.75-$9.25/kgMS, up from $7.25-$8.75/kgMS. The new mid-point lifts by 50c to $8.50/kgMS.
There’s also good news for unit holders- the co-op says its FY24 earnings are forecast to be at the top end of the announced range of 60-70 cents per share.
Fonterra chief executive Miles Hurrell says the announcements reflect the recent lift in GDT prices as well as the strength of the Co-op’s balance sheet.
“Since announcing our opening FY25 season forecast farmgate milk price in May, GDT prices have improved. We’ve reflected this in our revised forecast range, with our midpoint lifting 50 cents to $8.50 per kgMS,” he notes.
“It’s still early in the season, with a relatively small proportion of our sales book contracted, so we are maintaining a wide forecast range.
“We’re also pleased to be announcing an uplift in our Advance Rate payment schedule, which will see farmers paid more for their milk earlier in the season.
“Our balance sheet strength has allowed us to make several enhancements to the Advance Rate schedule over the last two seasons.
“The adjustments announced today will see farmers paid 10% more of the FY25 forecast Farmgate Milk Price from December paid January compared to other seasons, assisting farmers with on-farm cash flow,” says Mr Hurrell.
Hurrell also touched on the co-op’s performance for the 2024 financial year, which ended July 31, 2024.
“As we look to close out the books for the year, it’s become clear that we have maintained strong performance across FY24.
“We’re indicating we expect our earnings to be at the top end of our forecast range and this puts us on track for a strong full year dividend,” Mr Hurrell.
Fonterra’s final FY24 earnings remain subject to the finalisation of financial statements and audit.
The co-op will confirm its final FY24 earnings and full year dividend when it reports its financial results next month.
