Fonterra Suppliers Confident in Mainland Dairy Future
Fonterra's 460 milk suppliers in Australia, who will switch to Lactalis end of this month, are unfazed with the impending change.
The co-op, supplied by 107 shareholder farms, achieved record group income of $364 million and earnings of $140 million in 2018-19.
Milksolids processed from Tatua suppliers was 14.5 million kgMS, which is our divisor for earnings. This was lower than the prior season, due to extended dry summer conditions across our milk supply area.
Tatua’s group earnings of $140 million equates to $9.66/kgMS before retentions for reinvestment and taxation. This is an improvement on the previous season earnings of $8.62/kgMS.
“We have confirmed a cash payout to supplying Shareholders of $8.50/kgMS,” says chairman Steve Allen.
Fonterra has announced a final payout of $6.35/kgMS.
In addition, Tatua has retained earnings for reinvestment of $1.16/kgMS, equivalent to $16.8 million before tax.
Allen says continued growth of its value-add businesses provided improved revenue, and its bulk ingredient product mix performed well, despite mixed market conditions.
“In deciding our payout, we have aimed to achieve a balance between the needs of our shareholder’s farming businesses and Tatua’s requirements for reinvesting in our long term environmental, financial and social sustainability. “For the coming year this will include the development of a new engineering support facility and a major investment in wastewater treatment infrastructure. “
Tatua remains cautious regarding management of borrowings; it’s gearing (debt divided by debt plus equity) averaged 32% for the year, which was fractionally lower than the previous year average. Gearing at the end of the financial year was 27%.
“While we remain optimistic in our outlook for dairy and the season ahead, our optimism is tempered by continuing volatility in the global trade arena.
“In addition, uncertainty around emerging domestic policies on both climate change and fresh water management, have real potential to undermine investment confidence.
“Alongside our shareholders, we will nonetheless embrace these challenges constructively.”
