Fonterra increases annual revenues as profits decline

NEW ZEALAND – Fonterra, the world’s largest cooperative that processes milk and dairy products, has released its annual results which show a 12% increase in its revenue to US$17.6 billion, but with an 11% drop in its net profit after tax of US$682million due to lower margins.

The giant dairy company however said it was comfortable with its current farm gate milk price as it had lifted it to US$5.50 a kilogram of milk solids in July.

Fonterra also confirmed it would boost its processing capacity in Australia by 300 million litres, to 2.5 billion litres.

It currently processes two billion litres, almost at par with Australia’s leading dairy, Murray Goulburn, but has a spare 200 million litres of capacity.

Australian managing director René Dedoncker said this extra capacity would allow it to take farmers now on a waiting list to supply the dairy with more milk.

The New Zealand dairy giant also reported a group return on capital of 11.1 per cent, with the Australian business recording US$57 million earnings before interest and tax.

Mr Dedoncker said the turnaround in fortunes of the Australian business reflected Fonterra’s decision to focus solely on the products and brands it does well and divest other parts of the business.

“We are seeing our farmers invest. Their herd size is starting to creep which is nice,” Mr Dedoncker said.

“We are seeing 3 to 4 per cent growth, and I’d like to say it would continue but who knows.”

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