Fonterra’s Profits up 65 Percent Despite "Difficult" Year

23 Sep 2016 –-- Fonterra has reported profits up 65 percent year-on-year to $834m in a year which has been "incredibly difficult for farmers" amid low global dairy prices. Revenues were down nine percent to $17.2bn in the financial year 2015/16 but Fonterra stressed that its lift in profits meant the co-operative was in a strong position.

Fonterrra said its ingredients business had “shown real strength”.

Profits across ingredients came in at $63m, buoyed by sales volume growth of 22 percent.

However, some farmers are angry at the gap between Fonterra's profits and what it is paying farmers amid dairy prices which are at “unsustainably low levels”.

But other farmers argue it is better to be part of a company making profits than a struggling one.

Chairman John Wilson said that the 2015/16 season had been incredibly difficult for farmers, their families and rural communities.

He said: “Our Co-operative has responded. We continued with the significant and necessary changes we began in the business over three years ago to support our strategy and its priorities, and worked hard to return every possible cent of value back to our farmers.

“Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially through speciality ingredients and service offerings.”

“Through increased earnings and continuing financial discipline we have increased the return on capital and strengthened our balance sheet by significantly reducing debt.”

“We have done what we can to support our farmers with the Co-operative Support Loan, and early payment of dividends.”

“After a period of deliberate and disciplined attention to the business, we have become a stronger Co-operative operationally, financially and in our mindset with a clear sense of direction and a structure which will support real momentum in our strategy going forward.”

Fonterra is lifting its farm gate milk price by 50c to $5.25 a kg of milk solids, which marks its second raise in milk prices in under a month.

The dairy giant is paying a cash payout of $4.30 for the 2016 season, made up of a farmgate milk price of $3.90 per kg and a dividend of 40 cents per share.