Fonterra posts US$422m profit after tax, to review Chile, Australian operations inline with strategy to prioritize New Zealand milk

NEW ZEALAND – Farmer owned multinantional dairy cooperative Fonterra has recorded a NZ$599m (US$422m) reported profit after tax  for the 2021 financial year, as it moves into a new phase of growing the value of its business. 

According to the cooperative, the 2021 financial year benefited significantly from the divestments of DFE Pharma and foodspring.  

Normalized profit after tax grew from NZ$190m (US$134m) to NZ$588m (US$415m), driven by improved earnings and lower interest expense. 

Fonterra reported a well-balanced sales performance across the regions where it operates with the Greater China region posting a 10% rise in EBIT to NZ$403m (US$284m) driven mainly by “China’s dynamic economy and its love for dairy.” 

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Africa, Middle East, Europe, North Asia, Americas’ (AMENA) was not as resilient as China and managed a 28% decline in normalized EBIT to NZ$336m (US$237m). 

The company however reported an improvement in food service and consumer channels within the region, including a turnaround for our Chilean business. 

Overall, total group normalized EBIT was up 8% to NZ$952m (US$671m), with total group normalized operating expenditure down 3% to NZ$2.2bn (US$1.55bn).   

CEO Miles Hurrell said net debt decreased from NZ$872m (US$615m) to NZ$3.8bn (US$2.7m), while cash flow improved at 2.7x, putting the cooperative within its long-term target debt/EBITDA ratio.  

Hurrell noted that changing consumer behavior due to Covid-19, with people choosing to cook at home, has benefited consumer brands and supported upward momentum in the consumer channel performance, particularly in New Zealand and Australia.  

Review of Chile, Australia businesses

Fonterra said it is now turning to the next phase of its strategy, as it completes its reset and focuses on value growth.  

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As part of this strategy, the dairy cooperative revealed that it is reviewing both its Chile and Australian operations to free resources for a greater focus on New Zealand milk. 

“The operations [in Chile] do not require any New Zealand-sourced milk or expertise, and in this context, we are starting the process to divest our integrated investment in Chile,” Hurrell said.

For Fonterra Australia, Hurrell said that the company was considering the most appropriate ownership structure for the business with one option being an IPO where the cooperative will retain a significant stake. 

To further cement its position as a leader in sustainability and in dairy innovation and science, Fonterra has also committed to invest around NZ$1bn (US$710m) in reducing carbon emissions and improving water efficiency and treatment at our manufacturing sites. 

Additionally, the cooperative is aiming to increase its current total annual R&D investment by over 50% to around NZ$160m (US$113m) per annum in 2030.  

This will be critical in enabling Fonterra to produce higher-value dairy products which are necessary for its strategy to move more milk into foodservice and consumer channels.  

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