NEW ZEALAND – Multinational dairy cooperative Fonterra has reported an 11% growth in group revenue, to NZD23.4bn (US$13.53bn), for the 2022 financial year, and a 4% increase in normalized EBIT to NZD991m (US$ 573.32m) while normalized earnings per share were up 1% to NZD0.35.
Fonterra said it had a “good year” despite increased costs from supply chain volatility, which the dairy managed to maneuver through thanks to strong demand for dairy across multiple markets and products
Miles Hurrell, CEO of Fonterra commented: “These results demonstrate that our decisions relating to product mix, market diversification, quality products, and resilient supply chain, mean the co-op can deliver both a strong milk price and robust financial performance in a tough global operating environment.”
The Co-op’s total revenue increased from US$2.3 billion to US$23.4 billion due to higher product prices, but sales volumes decreased in FY22 due to short-term shifts in demand and ongoing shipping and supply disruptions.
Profit after tax was lower by NZ$16m (US$ 9.25m) and stood at NZ$583(US$311.11) but Fonterra explained this by benefitting from large gains from the sale of non-core assets in 2021 from selling its China farms last year compared to selling the global dairy auction platform Global Dairy Trade this year and accruing impairment costs from DPA Brazil, Fonterra’s JV with Nestlé.
The co-op’s ingredients portfolio, particularly across protein products, performed strongly with normalized EBIT increasing from NZ$365m to NZ$916m, an up by 15%.
While there were strong margins in the ingredient and active living portfolios, the total gross margin was down because of the higher cost of milk in food service and consumer channels.
A series of geopolitical and economic events also impacted Fonterra’s performance as confirmed by Hurrell, which included an NZ$80m (US$46.25m) adverse revaluation of the co-op’s Sri Lankan business payables, due to the devaluation of the rupee.
Africa, Middle East, Europe, North Asia, Americas (AMENA) normalized EBIT was NZ$527m (US$304.73m), up 57 percent, due to the improved gross margin in its Ingredients channel.
Asia Pacific (APAC) normalized EBIT was NZ$237m (US$136.99m), down 22 percent, with the improved performance in APAC’s Ingredients channel more than offset by the somewhat weaker consumer and foodservice channels.
Greater China normalized EBIT was NZ$432m (US$249.62m), up 7 percent, with an improved performance in its Ingredients channel partially offset by lower margins in the Foodservice and Consumer channels, as a result of the higher cost of milk.
The co-op also recorded its highest payout to date of NZ$9.50 per kgMS, up from NZ$7.74 in 2021, however, its milk collections were down 3.6% in total.
In New Zealand, ‘challenging weather conditions were blamed for the reduction of 4.2% while in Australia, Fonterra’s market share had improved with total milk volumes in line with the prior period.
The co-op recorded its strongest milk collection increase in Chile at 5.2% along with a market share gain of 1.3%.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE.