Dairy co-operative Fonterra's full year profit has eased back from last year's record high, but still topped the billion dollar mark as it lifted its payout to farmers.

Key numbers for the 12 months ended July compared with a year ago:

• Net profit $1.17b vs $1.6b (from continuing operations)
• Net profit $1.13b vs $1.58b
• Revenue $23.0b vs $26.1b
• Earnings 67 cents per share vs 95 cps
• Net debt $2.6b vs $3.2b
• Milk payout (2023/24) $7.83 a kilogram of milk solids vs $8.22 per kgMS
• Forecast payout (2024.25) midpoint $9 per kgMS
• Final dividend 55 cps vs 50 cps

Chief executive Miles Hurrell said the tail winds which had driven the previous year's result, including business divestments and high prices, had eased but it was still delivering strong results.

"We've maintained the positive momentum seen in FY23 (financial year 2023) and delivered earnings at the top end of our forecast range."

Hurrell said demand for other products, including foodservice and value-added ingredients, continued to be robust.

"Earnings were driven by higher margins and increased sales volumes in our foodservice and consumer channels. Our ingredients channel also continued to deliver strong returns, although down when compared to the record result seen in FY23."

Cost cutting largely offset the impact of inflation on costs, although it spent more on its IT and digital systems.

Increased farmer payouts

The co-operative raised its forecast farmgate milk price for the current season to a midpoint of $9.00 per kilo of milk solids in a range between $8.25 to $9-75.

Hurrell said the wide range reflected the early season uncertainties surrounding the global market.

"Our Co-op is in good shape, and I'm pleased to have delivered another year of solid returns to farmer shareholders and unit holders."

The milk payout for just ended season was $7.83 per kgMS, but with dividends of 55 cents a share the cash pay out was $8.38.

Fonterra has used up accumulated tax losses of past years and from this year will be paying tax.

The future

Hurrell said the review of Fonterra business, which might result in the sale of its consumer brands, including leading brands such as Anchor and Mainland, and sale of Sri Lankan and Australian businesses, was still under way. "We have appointed advisors to assist with assessing divestment options for our Consumer businesses and this work is ongoing ... [but] the businesses in scope for potential divestment are performing well."

He said Fonterra wanted to maximise the value of these businesses for farmer shareholders.

So far this year the co-operative has announced $375m of new facilities at three sites, but has moved to close parts of some Waikato factories, and looked to contract out jobs to India.

Hurrell said a revised business strategy would be released next week with a "sharper focus" on its strengths and where it could best create value.

Published with permission