Fonterra lifts New Zealand farmgate, posts overall profit

Fonterra has lifted at the New Zealand farmgate. But what’s in store for Australian farmers?

Fonterra has posted a $NZ1.1 billion net profit result, providing a lift at the New Zealand farmgate – but its Australian outlook is mixed.

The Auckland-based dairy co-operative released a rosy outlook overall, with profit after tax sitting at $NZ1.168b ($A1.075b) for the 2023-24 financial year.

Earnings before interest and tax from continuing operations were $NZ1.56b ($A1.44b) with earnings per share from continuing operations of NZ70c a share.

It will pay a total dividend of NZ55c per share comprising a 15-cent interim and 25c final dividend and a NZ15c special dividend. Last year’s full year dividend was NZ50c per share.

The strong result flowed on for a lift in the NZ farmgate milk price for the 2024-2025 dairy season, with the forecast price raised by NZ50c/kg with a midpoint price of $NZ9/kg milk solids.

The final farmgate milk price for the 2023-2024 season is $NZ7.83/kg ($A7.20) milk solids.

Fonterra Oceania managing director Rene Dedoncker said the Australian arm of the multinational business was solid, but no news was forthcoming on Australian farmgate price changes.

Fonterra Oceania managing director Rene Dedoncker. Picture: Adam Taylor

Gross profit for Fonterra Australian operations was down 9 per cent from $NZ294m ($A271m) to $NZ269m ($A248m).

“What you see globally is an after tax result of over $1bn — so it’s a healthy set of accounts. Whether you’re looking at return on capital, or even the reduction on debt,” Mr Dedoncker said.

“Australia’s contribution to (the overall result) in New Zealand dollars is $NZ79 million, that’s earnings before interest and tax. It’s slightly above where we were last year, so I characterise the Australian performance as solid, little on the modest side, but a good contribution to what has been a healthy global result.”

Mr Dedoncker said Australia’s farmgate milk prices in 2023-24 were out-of-step with global dairy commodity prices.

“If you look at the dairy imports by China, it’s significantly lower than any time in recent history,” he said.

“There’s been a massive decline in the past few years. But I wouldn’t just put it down to China. We were paying a milk price in Australia of $A9.20 (per kilo milk solids).

“The global price at some points last year was sometimes $3 below that.”

Fonterra Australia Suppliers’ Council chairman Paul Weller said his grouping reviewed Australian farmgate prices with management every two months.

“It’s a good result — it augurs well for us to keep encouraging Fonterra (management) to revise the price this year,” the northern Victoria farmer said.

“We’ve had the August review, the next is in October. When the price moves, under the dairy code of conduct, it has to be locked in until the end of the financial year, which is different to New Zealand. NZ can review down too. In Australia, when you review it, you have to guarantee it for the rest of the season.”