Fonterra’s NZ management says it will retain Australian operations

Fonterra’s New Zealand management flirted with a break from its Australian operations. But the Kiwis have changed their minds.

Fonterra will retain its Australian operations after a year weighing up whether to alter its trans-Tasman ties.

The Auckland-based processor reported Thursday morning a normalised net income of $NZ591 million ($A521 million) for the 2021-22 financial year, up one per cent on 2020-21.

Fonterra chief executive Miles Hurrell noted the company paid a record milk price to its NZ farmers of $NZ9.30 ($A8.20) per kilogram of milk solids.

Turning his attention to across the Tasman, Mr Hurrell said a review of Fonterra’s Australian operations had concluded with a decision to retain its operations.

Fonterra Australia’s sales volume declined from 373,000 to 365,000 megatonnes last financial year but its overall revenue rose by seven per cent and its gross profit by 16 per cent.

“Australia plays an important role in our consumer strategy with a number of common and complementary brands and products and as a destination for our New Zealand milk solids,” Mr Hurrell said.

“The business is going well, and it will play a key role in helping us get to our 2030 strategic targets.”

Fonterra Australia managing director Rene Dedoncker said the processor had been able to maintain its milk supply despite a static national milk pool.

“Twelve months ago, we kicked off the ownership review of the Australian business and it was in the context of the long-term aspirations of the co-op,” he said.

“After 12 months, we have validated that the Australian business is on-strategy; it does complement (the NZ arm of the business).”

Mr Dedoncker said international demand for Australian dairy was enjoying a lift, echoing results from the fortnightly Global Dairy Trade index this week.

“A great example is Perfect Italiano. It’s really booming in south-east Asia as a cooking cheese - and we make it here, in northern Victoria, in Stanhope,” he said.

Fonterra’s processing site at Wynyard in Tasmania.

In September last year, Fonterra announced an ‘ownership review’, with management setting a pre-Christmas deadline for a decision.

“To get the best of both worlds, we have Fonterra (NZ) maintaining that significant stake but ultimately freeing up some capital, so they can invest in their choices,” Fonterra Australia chief executive Rene Dedoncker said last year.

“And I get the freedom to set up a business here (in Australia) that has independence, that can create capital when it’s needed and invest in things that make sense here.”

However in June this year, Mr Dedoncker announced the operations review has been postponed indefinitely as the processor assessed the volatile economic climate.

“I don’t think any company is out there at the moment looking at executing future options in an uncertain world where investors firmly have their wallets in their pockets,” Mr Dedoncker said in June.