Fonterra narrowed its farmgate milk price forecast to a range of NZ$8.50kgMS to NZ$9.50kgMS for 2022/23, bringing its midpoint to NZ$9.00kgMS, down from the previous range of NZ$8.50kgMS to NZ$10.00kgMS. The narrowing of the forecast milk price follows strong Q1 results with total group normalised EBIT up 94% to NZ$368m and normalised profit after tax rising 84% to NZ$214m, taking normalised earnings per share to NZ13c, compared with NZ7c a year ago.
Fonterra Ingredients’ strong performance reflects favourable margins in its protein portfolio, especially for casein and caseinate used in medical nutrition. Performance in Foodservice improved over a year ago but the high milk price continues to put significant pressure on margins in both Foodservice and Consumer channels. According to CEO Miles Hurrell, Fonterra continues to make progress on its 2030 strategic ambitions with focus on its New Zealand milk pool. The recently released Sustainable Finance Framework aligns Fonterra’s funding strategy with its sustainability ambitions, which includes a pernership with Nestlé to develop a commercially viable, Net Zero Carbon dairy farm. Hurrell said the long-term outlook for dairy remains strong despite the current period of global uncertainty and the sting of inflationary pressures both on farm and across the business.
Meanwhile, Fonterra has revealed it will begin talks with 9,000 suppliers about setting Scope 3 emissions targets in response to pressure from customers, consumers and the finance sector to set these targets. Hurrell said 91% of the group’s emissions are from behind the farmgate. Most of Fonterra’s major customers have their own scope 3 emissions targets and are looking to Fonterra as a supplier to have targets in place. Fonterra wants to have ample time to put scope 3 targets in place so customers don’t look for alternatives among other dairy companies or alternatives that don’t include dairy. Hurrell flagged discussions will begin in a few months