Fonterra releases FY23 interim results

Fonterra has released its 2023 Interim Results, which show the Co-op has delivered a half-year profit after tax of $546 million, up $182 million compared to the same time last year, and a return on capital for the last 12 months of 8.6%, up from 6.1% in the comparable period.

According to Fonterra CEO Miles Hurrell, the results for the first half of the year show that the Co-op is performing well with profit up 50%. The Co-op was able to make the most of favourable market conditions with its diversification across channels and markets, enabling it to navigate disruptions.

“While milk powder prices have softened recently, impacting our forecast Farmgate Milk Price range, protein prices have been high, and this is reflected in the lift in earnings we’re reporting today,” Hurrell said.

“The outlook for high-quality sustainable New Zealand dairy remains positive. We have a clear strategy and are well-positioned to take advantage of this demand.”

Hurrell said Fonterra has continued to make strong progress towards its 2030 targets through our strategic choices to focus on New Zealand milk, be a leader in sustainability and be a leader in dairy innovation and science.

New Zealand milk

A sustainable supply of New Zealand milk is fundamental to achieving the Co-op’s 2030 goals. Its new flexible shareholding capital structure supports a sustainable milk supply and a stable balance sheet, while protecting farmer ownership and control.

Additionally, it has been working with the government to make changes to the Dairy Industry Restructuring Act (DIRA) to support the structure. These changes were passed by parliament in November 2022 and the transition to the new structure will occur on 28 March 2023.

Sustainability

The Co-op aims to make sustainability improvements both on-farm and off-farm to retain competitiveness. It will announce a target for Scope 3 emissions to help secure and retain high-value customers and enable the Co-op and its farmer owners to meet regulatory requirements and access finance.

Fonterra is investing in R&D to help reduce emissions. It currently has 18 methane reductions projects underway and 30 active trials of potential solutions. This includes a private–public partnership joint venture announced in November, through which government and partners will work together to reduce emissions.

“We’re also making progress in our work to transition our manufacturing sites out of coal by 2037. At our Waitoa site we’re converting one of our boilers to wood biomass. Scheduled to be operating later this year, the new boiler will reduce the site’s annual emissions by 48,000 tonnes of CO_2e, the equivalent of taking 20,000 cars off New Zealand’s roads,” Hurrell said.

Dairy innovation and science

The Co-op has various innovation projects underway to help achieve the targets set out in its 2030 strategy. These aim to improve product performance, explore science-backed nutritional solutions, transform customer experience and transport sustainable value change.

“Recent progress includes our partnership with PolyJoule, a Massachusetts Institute of Technology (MIT) spin-off, to trial the world’s first industrial-scale organic battery. It has been installed at our Waitoa manufacturing site to improve energy security.

“We’ve also established a new startup company with Royal DSM to accelerate the development and commercialisation of fermentation-derived proteins with dairy-like properties,” Hurrell said.

The Co-op has also upgraded its full-year forecast normalised earnings from 50–70 cents per share to 55–75 cents per share and announced a proposed tax-free capital return to farmer owners and unit holders of around 50 cents per share, subject to completion of the sale of its Chilean Soprole business.

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