Fonterra upgrades full-year earnings forecast

by | Mar 22, 2023 | Global, News

Fonterra announced interim FY2023 results, upgrading its top and bottom end range for its full year forecast earnings by NZ5c per share and announced a tax-free capital return of around 50c per share. The proposed tax-free capital return to farmers is subject to completion of the sale of the Chilean Soprole business. Half-year profit after tax was NZ$546m, with earnings per share of NZ33c and a decision to pay an interim dividend of NZ10c per share.

Fonterra moved a higher proportion of current season milk into non-reference products which benefited its earnings, reflected in the Ingredients channel performance with normalised EBIT up 118% to NZ$911m. The Consumer and Foodservice channels benefited from improved selling prices. Foodservice normalised EBIT rose 95% to NZ$116m, however, higher input costs and ongoing margin pressure impacted overall consumer channel performance. The domestic consumer business Fonterra Brands New Zealand (FBNZ) has been under pressure and Fonterra revised down the valuation by NZ$92m. Meanwhile, performance of Fonterra’s Asia consumer brands has been impacted by weakening currency in Asian markets, higher interest rates and a declining economic environment in some Southeast Asian markets, leading to a downgrade in valuation by NZ$70m for its Asia consumer brands Anlene, Chesdale and Anmum.

CEO Miles Hurrell said reportable segments have been updated to reflect its organisational change in support of the Fonterra strategy with Group Operations representing activities that collect and process New Zealand milk, Global Markets and Greater China. Group Operations EBIT rose NZ$412m to NZ$501m due to higher protein and cheese prices, while EBIT for the Global Market segment fell 4% to NZ$267m with higher in-market earnings offset by impairments and increased operating costs in the consumer channel. In Greater China, EBIT fell 1% to NZ$215m.