Fonterra profit drops on flat revenues

Lower commodity prices and a strong dollar has hurt Fonterra Cooperative Group's milk payout.

In its annual result, posted this morning, the dairy giant announced a payout of $6.40 for the 2011-12 season, 19% down on last year.

Revenue was flat at $19.8 billion while after-tax net profit dropped 19% to $624.8 million, largely because tax credits were not repeated this year.

The farmgate milk price of $6.08 per kilogram of milksolids (kgMS) was down from $7.60 last year.

A dividend of 32 cents per share has been announced, with retentions of 10 cents per share.

With Fonterra collecting almost 1.5 billion kilogram of milksolids, the payout to farmers totalled $9.56 billion, about $1 billion less than last year.

Profit before tax was up 9% on the prior year. Excluding tax credits of $202 million in the previous year, not repeated in the current year, net profit after tax improved by 10%.

In a statement, outgoing chairman Sir Henry van der Heyden says the 2012 year saw record dairy production worldwide.

“Global dairy demand held up reasonably well but this ocean of milk obviously impacted on global commodity prices, with the GlobalDairyTrade index reaching its lowest value in 34 months in May.

“This contributed to a lower farmgate milk price in the 2012 year. However, the impact of this decline on overall earnings for farmers has been eased a little by the much higher volumes of milk they produced.”

Chief executive Theo Spierings says the result showed Fonterra’s success in growing both volumes and value.

“The hard work of our farmers in producing record milk flows was matched by the efforts of the business in processing, selling and shipping these higher volumes, while also managing inventory levels,” he says.

“We know volatility is here to stay and we showed our ability to manage this volatility by adding value to our products, generating prices above GDT.”

Results highlights:

• Record New Zealand milk flows, up 11% to 1.493m kgMS in the current season.
• 11% increase in export volumes to 2.32 million metric tonnes (MT).
• Sales volumes increased 2% to 3.94 million MT.
• Flat revenues of $19.8 billion.

Last year, Fonterra 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 totalled $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.

In March, Fonterra posted an 18% gain in first-half profit. 

dwilliams@nbr.co.nz