Fonterra announces record result and payout

Dairy giant Fonterra has announced a record payout for the 2010-11 season of $8.25/kg milk solids before retentions following a 13% lift in its annual after tax profit to $771 million.

With the co-operative collecting 1.35 billion kg of milk solids the payout to farmers totaled $10.6 billion - $2.4 billion more than in 2010 and $1.5 billion more than Fonterra’s previous best in 2008.

Revenue for the year to July 31 was up 19% to $19.9 billion.

The final payout comprised of $7.60/kg and a distributable profit of 65c per share and was $1.55 ahead of last year.

Actual cash to farmers after retentions was $7.90/kg, which is $1.53 higher than the prior period’s $6.37/kg. For the average-sized dairy farm, producing around 100,000kg of milk solids, this equates to a $790,000 income.

Fonterra also confirmed its previous forecast farm gate payout for the current 2011-12 season of $6.75 and distributable profit range of 40-50 cents a share.

The lower forecast relative to 2011 reflects a softening of global commodity prices since early 2011, the company said.

Chairman Sir Henry van der Heyden said the record payout should filter through to the wider New Zealand economy.

"As Fonterra is a co-operative that is 100%  owned and controlled by New Zealand farmers, that money flows right back into the local economy as farmers reinvest in their businesses and buy more farm supplies and equipment," he said.

The record farmgate milk price reflected the recent strength of world dairy markets, with prices in some categories reaching or nearing historical highs during the past year.

"We also benefited from record milk production, as some of the best autumn conditions in recent years offset poor weather in many regions earlier in the season."

Fonterra chief executive Andrew Ferrier said the company achieved a 13% increase in net profit after tax, to $771 million, even after paying farmer shareholders 29% more for the milk they supplied.

"Although the business was impacted by higher dairy ingredient prices and a fragile global economy, our underlying profitability showed solid growth over last year due to improvements within our ingredients businesses and the strength of our consumer brands."

Mr Ferrier said the standout consumer business segment was Asia/Africa, Middle East, with normalised earnings rising 12%.

Meanwhile, Fonterra also published its Farmgate Milk Price Manual, which details how it calculates the amount paid to farmers.

The Statement shows that the 2011 Farmgate Milk Price of $7.60/kg milk solids was based on revenue of $9.51/kg, less cash and capital costs totaling $1.91/kg milk solids.

The 2011 Farmgate Milk Price is $1.50 higher than the previous 2010 Season’s $6.10/kg. This is driven by an increase of $1.56 in net revenue, offset slightly by an increase of 6 cents in costs. 

“These figures demonstrate what Fonterra has been saying all along – that the price New Zealand farmers are paid for milk, which in turn flows into retail dairy prices, reflects global prices for dairy commodities,” said Fonterra’s chief financial officer Jonathan Mason.

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