Following a 2019 full of challenges and changes, Fonterra has released its latest sustainability report, highlighting a revised strategy to its operations, as well as how its inaugural Sustainability Advisory Panel is advising the co-op.
In September, Fonterra announced a NZ$605 million net loss for FY19, where CEO Miles Hurrell said its new strategy approach would focus on the three bottom lines of “healthy people, healthy environment and healthy business”.
The 2019 Sustainability Report from Fonterra established new baselines for its ‘healthy business’ indicators, using results from FY19.
Baselines for future performance included a 5.8 per cent return on capital, NZ$699 million free cash flow, and a reduction in earnings per share to 17c, compared to 24c in FY18.
The reduction for the return on capital, as well as its drop in earning per share, reflects the “decline in normalised earnings (EBIT) due to challenges in the ingredients businesses in Australia and Latin America, and the consumer businesses in New Zealand, Sri Lanka, Hong Kong and Latin America”.
Meanwhile its free cash flow $99 million gain from FY18 to FY19 was a result of “financial discipline”, including revisions to Fonterra’s operation expenditure, reduced capital expenditure, improved cash flow and lower debt.
For FY20, Fonterra said it will inject $10 billion into rural communities by paying a competitive milk price to farmers, while aiming for:
- A debt no more than 3.75x its earnings;
- Capital expenditure of no more than $500 million; and
- Earnings guidance 15-25 cents per share.
Sustainable environment goals ahead
In its ‘healthy environment’ sector, Fonterra is on track to meet its 100 per cent target for wastewater management to align with industry standards on its manufacturing sites by 2026, as well as implementing tailored Farm Environment Plans (FEP) across all of its New Zealand farms by 2025, currently introduced to 23 per cent of sites.
Reduction in absolute manufacturing GHG emissions from its FY15 baseline had only 3.5 per cent progress in FY19, while aiming to reach its 30 per cent target by 2030.
“We have reduced absolute emissions by 3.5% from baseline and our overall manufacturing emissions intensity improved slightly compared to FY18. We have a roadmap to deliver the target and capital investment will be staged,” Fonterra said in the report.
The company is further aiming to achieve zero solid waste to landfill, as well as using materials that are 100% recyclable, reusable or compostable by 2025.
In FY19, Fonterra reduced its solid waste to landfill by 785 tonnes, equivalent to a 14 per cent reduction since FY18.
Advisory panel reviews
The panel of six forming Fonterra’s Sustainability Advisory Panel have also reflected on the sustainability challenges facing the co-op, as well as advising on how certain goals can be achieved.
Fonterra Sustainability Panel chair said the company was midstream in its “most profound strategic reset since its inception”, where pressure on the company to improve financial performance was crucial.
“With such open access to Fonterra’s decision makers, the Panel has a unique opportunity to work alongside the management team to create value for all stakeholders,” said Rob Fenwick, Fonterra Sustainability Panel chair.
“We have critiqued the company’s targets on several fronts and have brought an international perspective to a number of issues.”
“I thank my fellow Panelists, and I congratulate the work of Fonterra’s sustainability team who are doing a great job within the company.”
The full 2019 Sustainabilty Report from Fonterra can be accessed here.
Fonterra took out the top spot in Australia's Top 100 Food and Drink Companies Report 2019.
