NEW ZEALAND – Fonterra, a New Zealand multinational publicly traded dairy co-operative has reported an impressive 50% jump in half-year profits after tax despite.
According to the dairy’s interim report, after-tax profits were lifted by 50% to NZ$546m (US$333m), demonstrating a strong performance on the back of high dairy prices and ingredient sales.
“This lift in earnings is thanks to our co-op’s scale and ability to move our farmer owners’ milk into products and markets where we’re seeing favourable prices,” said Chief Executive Officer Miles Hurrell.
The impressive performance has triggered the dairy to increase its full-year normalized earnings forecast from 50-70 cents per share to 55-75 cents per share.
The farmer-owned dairy has further proposed a tax-free capital return to farmer-owners and unit holders of approximately 50 cents per share, pending the completion of the sale of its Chilean Soprole business.
The first half of the year was however not a smooth sail for the New Zealand-based dairy that controls almost a third of the global dairy trade.
Fonterra revealed that its Asia consumer brands in particular had been affected by weakening currency and higher interest rates as well as the declining economic environment in some South East Asian markets.
“For these reasons, we have revised down the valuation of FBNZ by NZ$92m and our Asia consumer brands Anlene, Chesdale and Anmum by NZ$70m,” Hurrell announced.
Fonterra has also made changes to its reportable segments, combining the previous results of AMENA and Asia Pacific into a new Global Markets segment, while Group Operations is shown as a separate segment.
Under the new reporting structure, the Global Markets normalized EBIT was down 4% to NZ$267m despite an increase of NZ$145m in the segment’s Ingredients channel earnings.
In the report, Fonterra also revealed that it intended to use proceeds from the sale of Fonterra’s Chile dairy business to reduce debt and return about 50c per share and unit, or around NZ$80m.
“We are aiming for a record date for the proposed tax-free capital return in late September 2023, with cash to be received by our farmer-owners and unit holders the following month,” Hurrell explained.
The Fonterra CEO also announced that the transition to its new Flexible Shareholding capital structure is set to take place on March 28, 2023, and that the company had allocated NZ$300m to help farmers transition to the new structure.
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