Fonterra announces third quarter updates

Fonterra has announced an opening 2023/24 season forecast Farmgate Milk Price of $7.25 to $8.75 per kgMS, with a midpoint of $8.00 per kgMS. It has also updated its current season forecast Farmgate Milk Price, increased its full year earnings guidance and brought forward the payment date of its proposed capital return.

Miles Hurrell, Fonterra CEO, said the milk price for this season has been impacted by reduced demand but the co-op remains on track for a strong full year dividend.

The forecast rage for the 2022/23 season has been narrowed from $8.00–$8.60 per kgMS to $8.10–$8.30 per kgMS and the midpoint reduced from $8.30 per kgMS to $8.20 per kgMS.

“We expect demand to gradually strengthen over the course of FY24 as China’s economy continues to recover from COVID-19,” Hurrell said.

“We recognise the pressure farmers are under and have designed a new Advance Rate guideline to get cash to farmers earlier in the season. Our strong balance sheet allows us to make these changes and we will be using this new Advance Rate guideline going forward, starting with the season about to commence.”

For the third quarter of FY23, Fonterra has reported a profit after tax of $1326 million, equivalent to 81 cents per share.

This is up $854 million on the same period last year and includes the gain on sale from Soprole of $260 million.

“Excluding the net gain from divestments, our normalised profit after tax improved on last year, up $606 million to $1078 million, equivalent to 65 cents per share,” Hurrell said.

As a result, Fonterra has lifted its FY23 full year forecast normalised earnings to 65–80 cents per share from 55–75 cents per share.

The co-op has continued to make progress on its long-term strategy in the third quarter of FY23. It has transitioned to its new Flexible Shareholding capital structure, completed the divestment of Soprole and finalised the exit of China Farms.

“With the sale of Soprole now complete, we are bringing forward payment of our proposed capital return of around 50 cents per share and unit from October 2023 to August 2023,” Hurrell said.

Fonterra is also continuing to take steps towards its sustainability goals and is expecting to announce a scope 3 or on-farm emissions target in the middle of 2023.

“It’s also pleasing to see the Centre for Climate Action Joint Venture, of which Fonterra is a shareholder, is now operational. The JV has made its first investment, contributing $1.8 million to Ruminant BioTech, a New Zealand-based startup that is developing a slow-release, biodegradable, methane-inhibiting bolus,” Hurrell said.

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