Fonterra to retain Australian business, may reduce $1b return to shareholders

Fonterra, which has divested foreign assets to focus on New Zealand milk, has decided not to sell a stake in its Australian business, which could reduce the $1 billion return it envisaged for shareholders.

Led by Chief Executive Miles Hurrell, Fonterra has sold assets after a period of global expansion fell short of promised profits and the company was burdened with too much debt. Hurrell has shifted the co-op’s focus back to New Zealand, where he is trying to get more value from the milk produced by its 10,000 farmer shareholders.

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“The cooperative is making tangible progress against our strategy – to focus on New Zealand milk, to be a leader in sustainability and to be at the forefront of dairy innovation and science,” Hurrell said when announcing the company’s full-year results on Thursday.

He said the sale of the company’s Chilean assets was progressing, but after evaluating a number of options for its Australian business, Fonterra decided it was in the cooperative’s best interest to retain full ownership.

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* Fonterra’s first-half profit falls 7% as record-high milk prices squeeze margins
* Fonterra raises farm milk price to a new record; sees $14bn cash boost for economy
* Fonterra raises farm milk price to record level; sees an economic boost of $13.2 billion

Fonterra’s Chilean assets, dairy brand Soprole and its milk supplier Prolesur, do not require New Zealand milk or expertise, while its Australian business uses both Australian and New Zealand milk.

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“Australia plays an important role in our consumer strategy with a range of shared and complementary brands and products and as the destination for our New Zealand milk solids,” Hurrell said. “The business is doing well and will play a key role in achieving our strategic goals for 2030.”

The Fonterra Co-operative Group has returned its focus to New Zealand milk.


The Fonterra Co-operative Group has returned its focus to New Zealand milk.

Last year, Fonterra released its 2030 strategy, which included plans to return approximately $1 billion to shareholders and shareholders by 2024.

Hurrell said the return anticipates divestments of Soprole and a stake in its Australian business.

“While we have elected not to sell any interest in our Australian business, we remain committed to seeking a significant return on investment for our shareholders and shareholders,” he said.

“The level of any return on investment will ultimately be determined by a number of factors, including the successful completion of the divestment program and our continued debt and earnings levels.”

Fonterra said its earnings for the year ended July were down 3% to $583 million. The win included an $80 million loss for the Sri Lankan business following economic disruptions in the country.

Revenue rose 11% to $23.4 billion, but sales volume fell due to short-term shifts in demand and ongoing supply and delivery disruptions.

The co-op generated 35 cents of earnings per share, at the high end of its 25-cent to 35-cent range and over 34 cents a year ago. The company expects earnings per share of 45 to 60 cents in the coming year. The metric is based on normalized revenue.

According to Hurrell, the longer-term outlook for dairy remains positive. In the medium term, Fonterra expected some geopolitical events to ease, such as the Covid-19 lockdowns in China and the economic challenges in Sri Lanka.

Fonterra will pay a final dividend of 15 cents per share, bringing the annual dividend up to 20 cents like last year.

The cooperative confirmed it will pay its agricultural suppliers a record farm-gate price of $9.30 per kgms for the 2021/22 season, bringing $13.7 billion to the economy. That’s up from $7.54 per kgMS last year.

For the coming season, the cooperative forecasts a milk price of US$8.50 to US$10 per kgMS. The median of the range paid out to farmers is $9.25 per kgms.

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