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.
Despite COVID-19’s impact the co-op delivered on all its four priorities, says chief executive Miles Hurrell.
The co-op has announced a profit after tax of $659 million for 2019-20, compared to a net loss of $605m last year.
The final farmgate milk price for last season is $7.19/kgMS with a dividend of 5c/share.
Hurrell says the co-op supported regional New Zealand, contributing around $11 billion into New Zealand’s rural economies through the milk price.
He says the co-op “rethought our approach to community support, with the aim of helping out more where it’s needed the most” – such as, growing the KickStart Breakfast programme alongside Sanitarium and the New Zealand Ministry of Social Development and partnering with the New Zealand Food Network to help get dairy nutrition to those that need it the most.
“We’ve built a great team through a focus on our culture, and we’ve seen that in action in how we’ve responded to COVID-19.
“We’ve continued to reduce our environmental footprint, including hitting our 2020 target to reduce energy intensity across our New Zealand manufacturing sites by 20%, from a 2003 baseline – cumulatively, that’s enough energy saved to power all the households in New Zealand for 1.5 years.
“We’ve achieved our key financial targets with normalised earnings of 24 cents per share, a Total Group normalised gross profit of $3.2 billion, a $181 million reduction in capital expenditure and a $1.1 billion reduction in debt so the ratio of Debt to EBITDA has now improved to be 3.4 times our earnings, down from 4.4 times.”
Hurrell says the work done to strengthen the balance sheet allowed it to focus on managing COVID-19.
“So far, demand for dairy has proved resilient and our diverse customer base and ability to change our product mix and move products between markets has meant we can continue to drive value.
“We’re at our best when we’re clear on what we need to do, why and how, and the whole co-op is focused on it. When I look back on last year, it’s great to see how this clarity has helped us respond to challenges, adapt and deliver results.”
