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Fonterra has posted an after-tax profit of $ 659 million for fiscal 2020, a $ 1.3 billion improvement over the prior year.
New Zealand dairy cooperative chief executive Miles Hurrell said it was a good year for the business with rising profits, debt reduction and strong milk prices.
“We increased our after-tax earnings by more than $ 1 billion, we reduced our debt by more than $ 1 billion, and this has put us in a position to start paying dividends again,” Hurrell said.
It will pay a dividend of 5 cents per share, which is on the lower end of its 5 to 7 cent range.
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“This year marks a return to dividend payments, a position we hope to maintain in the future, assuming normal operating conditions,” said Fonterra Chairman John Monaghan.
It will pay farmers $ 7.19 per kilogram of dairy solids for the 2019-20 season.
A final farm milk price of $ 7.14 per kilogram of dairy solids meant that the total payment for a fully stock-backed farmer was $ 7.19 per kilogram of dairy solids, the fourth highest for the cooperative. Monaghan said.
Christel Yardley / Stuff
In July, Fonterra said there was uncertainty about how the global recession and the current Covid-19 pandemic would affect demand for milk.
The full-year result is a huge improvement over the $ 605 million loss you had in financial year 2019, which was largely the result of massive asset write-offs. That came after Fonterra posted a loss of $ 196 million, the first in 2018.
Fonterra’s unit price is trading on the New Zealand Stock Exchange at $ 4.05, 85 cents more than last year.
Debt is down 19 percent or $ 1.1 billion compared to last year.
Hurrell said it was a two-halves year and the effects of the Covid-19 pandemic affected his performance in the second half, particularly in his consumer and foodservice businesses.
By strengthening its balance sheet, the company was able to focus on managing Covid-19, Hurrell said.
“The demand for dairy products so far has proven to be resilient and our diverse customer base and ability to change our product mix and move products between markets has meant that we can continue to create value.”
Normalized profit before interest and taxes of $ 1.1 billion was significantly higher than the loss of $ 17 million last year. Normalized profit included gains from asset sales and impairments and costs related to a strategic review.
Ross Giblin / Stuff
Fonterra boss Miles Hurrell says that despite the challenges from Covid-19, the cooperative carried out its will in the 2020 financial year.
Once they were withdrawn, normalized earnings before interest and taxes, which Fonterra used to show its underlying business performance, increased from $ 812 million to $ 879 million, despite the financial impact of Covid-19 on many of its markets, Hurrell said.
The main drivers were strong earnings in its ingredients business and strong sales and gross margins of its foodservice business in China in the first half of the year despite Covid-19-related disruptions, Hurrell said.
Fonterra had entered 50 new cities in China, bringing its total to 350.
Chris McKeen / Stuff
Fonterra President John Monaghan says that in light of Covid-19, he is being prudent in keeping his dividend at the lower end of his range.
Monaghan said that given the uncertainty created by Covid-19, a 5-cent dividend was a prudent decision and that it balanced his goal of further reducing debt and distributing the proceeds.
Earnings per share for fiscal 2020 were 24 cents. Fonterra forecasts earnings per share in the range of 20 to 35 cents a share in fiscal 2021, it said.
“This earnings range assumes a number of factors that work in our favor, including that there is no major disruption from Covid-19 relative to what we are currently facing, and improved business performance driven outside of Asia and Greater China.”
Monaghan said that Covid-19 meant that “the demand landscape remains finely balanced” from a milk price perspective.
“The best way to deal with uncertainty is to stick with strategy and focus on what is in our control: meeting our farmers, unit owners and customers, and maintaining our financial discipline.”
Hamilton Hindin Greene broker Grant Davies said the result was in line with forecasts, albeit with a slightly lower dividend payment than expected.
A lower dividend allowed Fonterra to pay off more debt and reduce the interest burden that came with higher debt levels, he said.
He expected Fonterra to continue with its debt reduction program which, in turn, would allow the company to pay better dividends in the future.
The result showed Fonterra had solid cash flow, which increased from $ 733 million to $ 1.8 billion, he said.
As indicated, the cooperative was distributing a decent payment to farmers, he said.
“That bodes well for the regions.”
