Fonterra Co-operative Group has warned of “uncertainty” and an ongoing risk of “volatility” in global markets, as it announced its opening forecast farmgate milk price range for the 2024/25 season today (Wednesday, May 29).
In a quarter three business update published today New Zealand’s largest dairy company reported profit after tax from continuing operations of NZ$1,013 million – up $20 million.
Fonterra’s CEO, Miles Hurrell said the co-op had experienced strong earnings particularly from its foodservice and consumer businesses which had a strong third quarter with a lift in earnings compared to the same time last year.
He said as a result of this performance the co-op had increased its forecast full year 2024 continuing operations’ earnings range to 60-70 cents per share, up from 50-65 cents per share.
Fonterra today also announced an opening 2024/25 season forecast farmgate milk price of NZ$7.25-8.75 per kg milk solids (MS) with a midpoint of NZ$8.00 per kgMS.
In its latest third quarter business update the New Zealand co-op noted that Global Dairy Trade (GDT) prices have lifted over the past couple of months and are back to levels seen around the start of the calendar year.
But Fonterra outlined that its current season forecast farmgate milk price midpoint remains unchanged at NZ$7.80 per kgMS but because it is near the end of the season, it has narrowed the range to NZ$7.70-$7.90 per kgMS.
Hurrell added: “Looking to the 2024/25 season, milk supply and demand dynamics remain finely balanced and China import volumes have not yet recovered to historic levels.
“Given the early point in the season, the uncertainty in the outlook and ongoing risk of volatility in global markets, we are starting the season with a cautious approach.”
The co-op also highlighted in its latest financial update that it had recorded higher sales volumes in its foodservice and consumer businesses.
Its CEO said: “We also saw price relativities ease over the quarter, and we anticipate them to narrow further in quarter four as they return to more historic levels.
“Gross margins remain strong across all three channels as our in-market teams continue to drive pricing and volume. Foodservice and consumer volumes are up 4% and 7% respectively year on year, with margins consistent with quarter to
“Our EBIT (earnings before interest and taxes ) of $1,440 million reflected improved performance in foodservice and consumer, with Ingredients down year on year following record highs in full year 2023.”
Fonterra
The latest financial update also shows that Fonterra’s operating expenses were up over the quarter due to inflation combined with upfront costs of efficiency projects and an increased IT spend.
“We are heading into year end with a strong balance sheet, with Fonterra’s underlying performance and lower debt position helping to further reduce our financing costs,” Hurrell added.
Earlier this month the co-op announced “a step-change” in its strategic direction which included the possible sale of its major brands and other assets.
Although its CEO said it was “still early days” in relation to this he also confirmed that the co-op had “received a high volume of interest” in the potential divestment of is consumer and associated businesses.
“We commit to providing farmer shareholders, unit holders, our people and the market updated on new developments as they occur,” Hurrell said.