Fonterra lifts milk price

by | Dec 8, 2021 | Global, Prices

Fonterra delivered its Q1 update last week and lifted its forecast farmgate milk price to a range of NZ$8.40kgMS – NZ$9.00kgMS, taking the midpoint forecast payout to NZ$8.70kgMS, up from NZ$8.40kgMS. The 2022 forecast earnings outlook is 25c – 35c per share, lowered at the top end of the range due to increased pressure on Consumer and Foodservice margins. Normalised EBIT for the quarter was NZ$190m, down NZ$60m from a year ago with tighter margins relative to a strong first quarter last year, and significantly higher input costs than the same period a year-ago, driven by a 30% increase in WMP prices.

Group sales volume is down due to lower milk production early in the season. Despite revenue lifting 5% YOY due to higher sales prices in-market, reflecting higher input costs, gross profit fell 13% to NZ$661m in the first quarter of FY22. The Ingredients channel recorded better performance and its Foodservice division maintained stable sales with tighter margins due to higher milk price. Improved performance for Fonterra’s Consumer division in Chile was offset by lower margins in other markets.

Fonterra’s season to date milk intake from June to October remains 3.2% behind the season prior as a cold and wet spring with limited sun affected pasture growth and collections. Fonterra’s full season milk production forecast remains at 1,525m kgMS, down 0.9% on the previous season.