Fonterra has announced an opening forecast range of NZ$8.25kgMS – NZ$9.75kgMS with a NZ$9kgMS midpoint, reflecting continued demand for dairy and constrained global supply. Fonterra chief executive Miles Hurrell said Fonterra’s wide range for 2022/23 was a consequence of the increasingly volatile global environment. Fonterra maintained its 2021/22 forecast milk price of NZ$9.10kgMS – NZ$9.50kgMS.

According to Fonterra’s Q3 business update EBIT totalled NZ$825m, down 14% YOY, while profit after tax fell 20% YOY to NZ$472m. Revenue for the quarter rose 10% due to higher product prices, which was partially offset by reduced sales volumes down 4%YOY due to lower milk production and timing of sales due to short-term impacts on demand. Hurrell said Fonterra’s export markets had experienced shocks, impacting product sales with multiple events were impacting multiple markets now. AMENA (Europe, Middle East & Africa, North Asia and the Americas) continued to deliver a strong result with normalised EBIT up 30% due to improved gross margins in the Ingredients channel and in Chile. The Ingredients business also performed well in Greater China with EBIT up 73% YOY to NZ$197m and in Asia Pacific where EBIT rose 143% YOY to NZ$136m. Hurrell said continued lockdowns in Greater China were likely to show up in Fonterra’s Q4 results as all restaurants and food outlets were closed in early April in Shanghai. Asia Pacific is impacted by “unprecedented economic challenges” in Sri Lanka with the region’s EBIT down 43% YOY to NZ$177m.

Fonterra continues to take steps towards its long-term strategy and expects necessary legislative changes to support the new flexible shareholding structure to progress through Parliament later this year.

Meanwhile, Fonterra’s Sri Lankan business is taking a NZ$81m hit as the rupee continues to devalue against the US dollar after Sri Lanka plunged into turmoil, struggling to pay for essential imports, and foreign exchange reserves have been depleted. The rapid devaluation of the Sri Lankan rupee against the US dollar has resulted in an adverse revaluation of Fonterra’s Sri Lankan business, according to Hurrell as Fonterra’s product is sold in US dollars.

Fonterra collects and processes milk from around 4,500 local dairy farmers in Sri Lanka, processing it into set and stirred yoghurt, drinking yoghurt, fresh and flavoured milk.