Fonterra has reported its interim half-year results with profits after tax down 7% to NZ$364m. Group revenue rose 9% to NZ$10,797m, while group EBIT was down 11% to NZ$607m as milk prices are in a record high range of NZ$9.30kgMS to NZ$9.90kgMS. The group’s net debt fell 8% in the half-year to NZ$5.6bn. Fonterra expects milk collections for the season to be down 3.8% YOY to 1,480m kg of milksolids.

Fonterra Ingredients segment margins improved in the first half, however higher milk price adding pressure on Foodservice and Consumer channel margins while COVID continued to impact. Normalised EBIT increased 25% to NZ$250m across AMENA, driven by improved performance in Fonterra’s Chile business and increased sales of higher value ingredients, used in high protein snacks bars and ready-to-drink medical nutrition beverages. Fonterra sees continued firm demand in China for dairy with Ingredients benefitting from strong demand and good margins. Normalised Greater China EBIT is down 20% to NZ$236m, particularly in Foodservice where, despite steady volumes, higher milk prices impacted gross margins. Across APAC, normalised EBIT fell 33% to NZ$158m. Gross margins in Fonterra’s Ingredients channel improved however this was offset by higher cost of milk, impacting gross margins in both the Consumer and Foodservice channel, particularly in its Southeast Asia and New Zealand businesses.  

Fonterra chief executive Miles Hurrell said the company was on track to maximise value and return around NZ$1bn of capital to its shareholders and unitholders by FY24. Fonterra is making progress on the divestment of its Chilean business and the ownership review of its Australian business, part of its strategy to focus on New Zealand milk and lead in sustainability and innovation.