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Fonterra Increases Net Profits by 183% and Enhances Forecasts for the Current Season

Fonterra Increases Net Profits by 183% and Enhances Forecasts for the Current Season
Sep 24, 2015 By Ben Visser

Fonterra Co-operative Group Limited (ASX:FSF) reported its full year results for FY15. The Co-operative increased profits by 183 per cent and lifted forecasts for the current season.

The Co-operative reported net profit after tax (NPAT) of $506 million, up 183 per cent on the previous year, marked by strong second half year performance in what the company describes as difficult market conditions.

The Co-operative has stated that it will pay a final Cash Payout of $4.65 for the 2015 season for a 100 per cent share-backed farmer. The payout will comprise a Farmgate Milk Price of $4.40 per kgMS and a dividend of 25 cents per share. According the Chairman, John Wilson, extremely challenging trading conditions globally had affected all parts of the Co-operative’s business.

“Falling global dairy prices due to a supply and demand imbalance impacted the Milk Price, while the dividend reflected higher funding costs following significant investment in capacity to support milk growth in New Zealand, essential investments in the key strategic market of China, and the costs of maintaining a higher Advance Rate through the season.

“The strengthening of performance in the second half resulted in normalised earnings before interest and tax almost doubling, with good growth in our consumer foodservice businesses and the results of a major push in our ingredients business to offset low milk prices with improved margins.”

Cash interest costs on funding came in at $427 million, up 95 million on last year and had an impact of approximately 6 cents per share.

According to Mr Wilson, despite drought in some regions and floods late in the season, milk collection across New Zealand for the 2014/15 season to 31 May 2015 was 1,614 million kgMS, up 2.0 per cent on the previous season.

Going forward, the Co-operative has increased forecasts for its Farmgate Milk Price for the 2015/2016 season by 75 cents, to $4.60 per kgMS. Is has decreased its forecasts for New Zealand production volumes by 5 per cent compared to the previous season. The forecasted total pay out to farmers in the 2015/16 season is now $5 – 5.10, comprising of a forecasted Farmgate Milk Price of $4.60 per kgMS and earnings per share of 40 – 50 cents per share.

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Ben Visser Author: Ben Visser Sep 24, 2015

Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.

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