Fonterra Co-operative Group’s 1H FY21 results show a positive first half, with CEO Miles Hurrell saying the company was pleased with its Reported Profit After Tax of NZ$391 million.
Snapshot:
- Reported Profit After Tax $391 million, down 22%;
- Normalised Profit After Tax: $418 million, up 43%;
- Total Group normalised Earnings Before Interest and Tax (EBIT): $684 million, up 17%;
- Total Group EBIT: $657 million, down 18%;
- Net debt: $5.6 billion, down 3%;
- Total Group normalised Gross Profit: $1,722 million, up 3%;
- Total Group normalised Gross Margin: 17.4%, up from 16%;
- Total Group normalised Operating expenditure: $1,055 million, down 3%;
- Normalised Greater China EBIT: $339 million, up 38%;
- Normalised Asia Pacific EBIT: $190 million, up 9%;
- Normalised Africa, Middle East, Europe, North Asia, Americas (AMENA) EBIT: $201 million, down 7%;
- Full year forecast normalised earnings per share: 25-35 cents per share;
- Interim dividend: 5 cents per share;
- Forecast Farmgate Milk Price: $7.30-$7.90 per kgMS; and
- Forecast milk collections: 1,525 million kgMS, up 0.5%.
Hurrell said: “While down on this time last year at a headline level, the 2020 financial year benefited significantly from the divestments of DFE Pharma and foodspring.”
From a performance perspective, Hurrell says the Co-op has had a great first six months of the 2021 financial year with Total Group normalised EBIT up $100 million to $684 million, a Total Group normalised Gross Margin of 17.4% (up from 16%) and Total Group normalised operating expenditure down $37 million.
“Our standout performer continues to be Greater China. The team has delivered a 38% increase in normalised EBIT to $339 million, reflecting the strength of our Foodservice business in this region, improvements in our Consumer business and China’s strong economic recovery following the initial impact of COVID-19.
“Asia Pacific’s normalised EBIT is up 9% to $190 million as a result of improvements in Foodservice and Consumer. Consumer has benefitted from more people staying at home and cooking with dairy and a renewed focus on our brands of Anchor, Anmum and Anlene.
Fonterra has also continued to reduce its shareholding in Beingmate, which on 31 January 2021 was sitting at 3.94 % and is now 2.82%.
Hurrell says Fonterra will continue to sell down its remaining shareholding and expects to have fully exited this investment before the end of this financial year.
“As shown through our results today, Greater China continues to be one of our most important strategic markets. We remain committed to growing the value of our Greater China business, which we’ll do by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so.”
“Despite a strong first half, we are expecting our earnings performance to come under significant pressure in the second half.
“The strong milk price is great for farmers. It’s good for New Zealand too – with a mid-point of $7.60 per kgMS, it would see us contribute more than $11.5 billion to the New Zealand economy.
“However, the increasing raw milk prices through the first half and now into the second half puts a lot of pressure on our sales margins and this will be seen through the second half of the year.
