New Zealand’s Fonterra Co-operative Group Ltd said it had managed a small increase in annual profit, as strong dairy prices globally offset a weather-related fall in milk production at home and a drop in Chinese demand due to lockdowns.
The world’s biggest dairy exporter’s normalised net profit, which excludes one-off charges, came in at NZ$591 million ($345 million) for the year ended July 31, up 1% on the prior year.
“These results demonstrate that our decisions relating to product mix, market diversification, quality products and resilient supply chain mean the Co-op is able to deliver both a strong milk price and robust financial performance in a tough global operating environment,” Fonterra CEO Miles Hurrell said in a statement.
After a 4.2% decline in annual domestic milk production, Fonterra expects domestic output to be flat at best or lower this year. Despite this, it is upbeat about earnings prospects due to higher prices and has said it expects to earn between 45 and 60 New Zealand cents per share this financial year.
That compares with an earlier estimate of 30 to 45 cents and with a result of 35 cents for the past financial year.
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Fonterra’s chief financial officer, Marc River, said the decline in domestic output meant the company’s sales teams were undergoing a big mind shift from having to find new buyers to thinking about who the company might not sell to.
“The opportunity is how do you get as much value per drop of milk as you can to bring that back home to those farmers,” he said.
He also said that while ongoing COVID-19 related lockdowns in China were still hurting demand there, global pricing is currently less driven by China than it had been in the past.
Fonterra was seeing cost inflation across the board and expects to see wage inflation come through in the near term, he added.
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