Fonterra has released its FY19 annual results, announcing a net loss after tax of $605 million, while its final farmgate milk price for the 2018/19 season was $6.35 per kgMS. The company says it will refresh its strategy and changes to its operating model and management team.
Despite the co-operative’s free cashflow being up 83 per cent, at $1,095 million, Fonterra’s normalised earnings before interest and tax (EBIT) was down nine per cent, at $819 million.
Fonterra CEO Miles Hurrell said 2019 was incredibly tough for the co-operative but it was also the year Fonterra made decisions to set up for future successes, including changes to asset values and future earnings, as well as lifting financial disciople and completing a strategy review.
“Many of these calls were painful, but they were needed to reset our business and achieve success in the future,” said Hurrell.
“We made the decision to reduce the carrying value of several of our assets and take account of one-off accounting adjustments. These totalled $826 million, which contributed to a Net Loss After Tax of $605 million for FY19.”
“But what I hope people can also see is that we’re leading the co-op with a clear line of sight on potential opportunities as well as the risks.”
Hurrell set out a three-point plan for the co-operative in 2018 by taking stock of the business, “getting basics right” and ensuring more accurate forecasts, and is “pleased with the progress we’ve made with our financial discipline”.
“You can see it in our improved cashflow, reduced debt and significant cost savings,” he said.
“[The co-operative’s] new strategy is rich in innovation, sustainability and efficiency. It unlocks value and sees us focusing on three goals – healthy people, healthy environment and healthy business.’
Hurrell said Fonterra will focus on “world-class dairy ingredients” for the categories of paediatrics, medical and ageing, sports and active, and core dairy, as well as markets through Asia Pacific.
In organisational structure, Fonterra will shift its two central businesses – ingredients, and consumer and foodservice – to three in-market customer facing sales and marking business units, as Asia Pacific (APAC), Greater China (GC), and Africa, Middle East, Europe, North Asia, Americas (AMENA).
Appoints from the current Fonterra team – Judith Swales and Kelvin Wickham – will lead as APAC CEO and AMENA CEO, respectively.
Fonterra's results follow its annoucment earlier in the week to sell its 50 per cent share in DFE Pharma as part of a strategy to gain more than $1 billion for debt reduction.