Fonterra targets growth in Australia

25 Sep, 2017 10:23 AM
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René Dedoncker: Fonterra is optimistic about export and domestic opportunities for growth.
...generating sustainable profits while paying a competitive milk price to our supplying farmers
René Dedoncker: Fonterra is optimistic about export and domestic opportunities for growth.

Fonterra Australia is planning to grow its milk supply and processing capacity in Australia.

The company announced its plans for the Australian market as it released its annual results, which revealed after-tax profit was down 11 per cent last year to $NZ745 million.

The company also announced an increased payout for its NZ farmer shareholders.

The final cash payout to NZ farmer shareholders for 2016/17 was confirmed at $NZ6.52, made up of a farmgate milk price of $NZ6.12 per kilogram milk solids and a dividend of 40 cents per

share.

Revenue was up 12 per cent to $NZ19.2 billion, but earnings before tax and interest (EBIT) was $NZ1.155 billion, down 15 per cent.

Fonterra Australia managing director René Dedoncker said the Australian business was generating sustainable returns and was looking to grow to meet higher demand for dairy.

“We have hit all of our performance targets, we have a clear strategy which is delivering and we have the right assets and product mix on the ground," he said.

"We are now looking to build on that base with further expansion linked to growing customer demand for consumer dairy, foodservice products and dairy ingredients.

“With our plants full we will be accelerating our capital investments in regional Victoria and Tasmania, playing to our strengths in cheese, whey and nutritionals.”

Australia is Fonterra’s largest milk pool outside New Zealand and continues to grow, with milk volume growing to 2 billion litres from 1.6 billion litres last season, and a waiting list for new suppliers who would like to supply the company.

In its annual report, the company said the successful turnaround of the Australian business had contributed to a four per cent increase in normalised earnings in Oceania.

"After a multi-year transformation the ingredients, consumer and foodservice businesses (in Australia) are performing well, generating sustainable profits while paying a competitive milk price to our supplying farmers," it said.

"This turnaround is reflected in our milk collections in Australia, where volumes grew by four million kgMS, up three per cent for the season despite the country’s overall production declining seven per cent.

"We have also re-opened our facility at Stanhope.

"This plant will produce a range of cheeses for the domestic and global markets."

Mr Dedoncker said investments at Wynyard, Tas, and Cobden, Vic, as well as the rebuild at Stanhope, had added 75,000 metric tonnes of capacity in the last 18 months.

Fonterra would continue to work with its Australian farmers to make the most of the global opportunities available in dairy.

“Along with our business, we’ve made significant progress with our farmers and we’ll continue that so that they can share the confidence that we have about the future opportunities," he said.

“We are optimistic about export and domestic opportunities for growth and we bring the benefit of a global supply chain that’s integrated into our Australian milk pool.

"This ensures farmers here share in the benefit of the returns through a competitive and sustainable milk price.”

Fonterra maintained its earlier farmgate forecast for 2017-18 for its NZ farmers at $NZ6.75 per kgMS, with an earnings per share range of NZ45-55c for a total of $NZ7.20-$NZ7.30.

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