Fonterra Cooperative Group [NZX:FCG], which posted a 53 percent drop in first-half profit as gains in prices of milk powder ran ahead of products such as casein and cheese, says the gap is becoming less pronounced - a sign that pressure on margins may ease.
Prices of reference commodity prices used to calculate the farmgate milk price- whole and skim milk powder, butter milk powder, butter and anhydrous milk fat - rose 44 percent to $5,981 a tonne in the third quarter while non-reference product prices, cheese and casein, rose 22 percent to $7,499 a tonne.
That's a smaller gap than in the first quarter, when prices gained 62 percent and 22 percent respectively, the Auckland-based company said in its latest global dairy update.
Last November, Fonterra took a $157 million provision against inventory of specialised ingredients and branded consumer products produced by its NZ Milk Products division because rising input costs squeezed margins. In March this year, it posted a slump in first-half earnings as gross margin shrank to 12.5 percent from 18.6 percent.
The company has said it can't process more milk into higher returning milk powder products until it builds more driers because of the mix of its factories, which can produce milk powder versus cheese and casein at a ratio of 75 percent to 25 percent.
The volume of sales of reference commodity prices shipped fell 2 percent in the third quarter as Fonterra took advantage of higher prices to ship more volume earlier in the year, while some was contracted for shipment in the fourth quarter. The volume of non-reference products shipped fell 13 percent.
Total production volume rose 21 percent in the third quarter, reflecting the impact of drought in the same quarter of 2013.
Milk collection across New Zealand for the 11 months ended April 30 rose 8 percent to 1,524 million kilograms of milk solids.
Units of the Fonterra Shareholders' Fund were unchanged at $6.0.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- MARKET CLOSE: NZ shares mixed; Spark, Fletcher join Asian rally, Xero drops as Drury trims stake
- Xero directors Drury, Winkler and Morgan cash in on 35% share price rally
- Sir Ralph Norris spells out reasons for Fonterra board departure
- iPredict closing down due to money laundering risk
- Serco's prison report challenge: Hide and Davis go head-to-head
Most listened to
- “A very ballsy thing to do” – Rodney Hide and Kelvin Davis discuss Serco’s response to Correction’s Mt Eden Prison report
- “The response from shareholders has been overwhelming” — A2 Corporation chief executive Geoff Babidge
- Greg Gent says a board of 13 people is "prehistoric"
- Arvida CEO Bill McDonald on his company's half-year net profit
- Lance Wiggs on the future of food exports
- Auckland Councillor Chris Darby on the Council's alternative funding report
- Nevil Gibson discusses his latest Editor's Insight on oil prices
- Campbell Gibson, Nick Grant and Chelsea Armitage chat about the inner workings of New Zealand media
- Paul Brislen discusses the 'snake oil' sales tactics of SalesConcepts
- Fonterra chief executive Theo Spierings reveals his ambitious China plan
- UDC Finance chief executive Wayne Percival talks about the company's profit
- Hamish McNicol discusses the latest court stories