Fonterra’s finances overcome COVID-19 impacts in dairy markets
Fonterra Co-operative Group has performed well for the first nine months of 2019-20, despite setbacks in global food service markets.
NEW ZEALAND dairy processor Fonterra Co-operative Group appears to be weathering the COVID-19 outbreak, with earnings higher and debt lower than last year.
Releasing its third quarter results for the nine months to April 30, Fonterra chief executive Miles Hurrell said normalised earnings before interest and tax was $NZ815 million ($A758 million), about 59 per cent higher than the $NZ514 million ($A478 million) recorded for the previous corresponding period.
Net debt was $NZ1.7 billion ($A1.6 billion) lower than the $NZ7.4 billion ($A6.9 billion) recorded at the same point last year.
Mr Hurrell said the work carried out during the past year to strengthen Fonterra’s balance sheet and the co-operative’s agility had helped it manage impacts from the coronavirus over the past few months.
“We’re drawing on our global supply chain and diverse product and customer base to minimise disruptions for our customers and our business,” he said.
“COVID-19 has affected virtually every country, market and industry, and as a result, the global dairy market is volatile and the outlook is uncertain.
“We are drawing on all our experience in managing market volatility.”
Mr Hurrell said all three of the co-operative’s business units had performed well in the first nine months of the financial year, despite the food service division suffering a negative impact in the third quarter due to COVID-19.
The food service division’s EBIT for the first nine months was $NZ208 million ($A193 million), 54 per cent higher than the $NZ135 million ($A126 million) recorded for the previous corresponding period.
The closure of restaurants, bakeries and cafes in many of Fonterra’s markets had impacted sales but Mr Hurrell said the sector in China had turned around from March and continued in April.
He said COVID-19 impacts on the food service sector were now showing up in Oceania, South East Asia and Latin America.
Mr Hurrell said the ingredients division’s EBIT was $NZ615 million ($A572 million), 9 per cent higher than last year, and the consumer business EBIT was $NZ187 million ($A174 million) or 46 per cent higher, the latter as a result of people stockpiling food.
He said full year earnings were likely to be at the higher end of forecasts but there were still significant uncertainties in the food service division.
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