fbpx
Print this page
Friday, 03 December 2021 10:29

High milk prices bite Fonterra's profit

Written by  Sudesh Kissun
Fonterra chief executive Miles Hurrell. Fonterra chief executive Miles Hurrell.

Soaring whole milk powder (WMP) prices are lifting forecast milk price to Fonterra farmer suppliers but it is also affecting the co-op’s profitability.

Fonterra’s first quarter results have taken a $60 million hit, thanks mostly to WMP prices rising 30% compared to first quarter results last year.

The co-operative has delivered a total group earnings before income and taxes (EBIT) of $190 million for the three months ending October 31.

Chief executive Miles Hurrell says there have been a number of factors at play in the first quarter.

“We’re seeing stable sales volumes in our foodservice channel, but a milk price at these high levels has squeezed margins. Our Chilean business continues to improve but tightening margins and weaker local currency in other markets have impacted our consumer channel overall.

“In our Ingredients channel, we’re seeing margins in our longer-term pricing contracts return to more normal levels, which has helped push Total group gross margin up from the last quarter last year.

“We continue to see the benefit of our focus on financial discipline with lower interest expense, and operating expenditure down 2% on the same quarter last year.”

Hurrell says “looking at the whole picture”, he’s proud of what’s been achieved.

“With EBIT of $190 million and a strong farmgate milk price, we are starting to consistently deliver solid commercial outcomes.”

While the impacts of COVID-19 continue to be felt around the world, Hurrell says the co-op is working hard to deliver for farmer owners, unit holders and customers and supporting employees.

“The resilience of our people and our supply chain means we continue to stay on top of the strong demand for our New Zealand milk.”

“However, it is concerning to hear about new variants, which are potentially more resistant to vaccines. There is also the ongoing question of whether economies can rebound from the pandemic and then sustain their financial health.”

More like this

Farmers' call

OPINION: Fonterra's $4.22 billion consumer business sale to Lactalis is ruffling a few feathers outside the dairy industry.

Wasted energy

OPINION: Finance Minister Nicola Willis could have saved her staff and MBIE time and effort over ‘buttergate’ recently by not playing politics with butter prices in the first place.

Featured

Dr Mike Joy says sorry, escapes censure

Academic Dr Mike Joy and his employer, Victoria University of Wellington have apologised for his comments suggesting that dairy industry CEOs should be hanged for contributing towards nitrate poisoning of waterways.

People-first philosophy pays off

The team meeting at the Culverden Hotel was relaxed and open, despite being in the middle of calving when stress levels are at peak levels, especially in bitterly cold and wet conditions like today.

Farmer anger over Joy's social media post

A comment by outspoken academic Dr Mike Joy suggesting that dairy industry leaders should be hanged for nitrate contamination of drinking/groundwater has enraged farmers.

From Nelson to Dairy Research: Amy Toughey’s Journey

Driven by a lifelong passion for animals, Amy Toughey's journey from juggling three jobs with full-time study to working on cutting-edge dairy research trials shows what happens when hard work meets opportunity - and she's only just getting started.

National

Machinery & Products