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Fonterra reports 3% drop in after tax earnings to $583 million; retains forecast 2022/23 milk price range of $8.50–$10.00, with a midpoint of $9.25; will keep full ownership of Australian business

Rural News / news
Fonterra reports 3% drop in after tax earnings to $583 million; retains forecast 2022/23 milk price range of $8.50–$10.00, with a midpoint of $9.25; will keep full ownership of Australian business

Dairy co-operative Fonterra's declared a final milk price of $9.30 for the 2021-22 season - easily a record - and a final dividend of 15 cents a share.

The total dividend for the year is 20c.

It has left its guidance for the current season unchanged, with a broad price range of $8.50-$10.00 per kilogram of milk solids - giving a 'mid-price' of $9.25. It has also retained its recently issued guidance of 'normalised' earnings per share of between 45c and 60c.

The co-op reported that net profit fell 3% to $583 million in the year to July. 

Fonterra had earlier indicated that it might sell-down its Australian business, but now says it will retain full ownership.

Annual Results Summary

• Total Group Revenue: NZ$23.4 billion, up 11%
• Reported Profit After Tax: NZ$583 million, down 3%
• Normalised Profit After Tax: NZ$591 million, up 1%
• Total Group normalised EBIT: NZ$991 million, up 4%
• Net Debt: NZ$5.3 billion, up NZ$1 billion
• Normalised earnings per share: 35 cents per share, up 1 cent
• Final 2021/22 Farmgate Milk Price: NZ$9.30 per kgMS
• FY22 Total Dividend: 20 cents per share (interim: 5 cents; final: 15 cents)
• Milk collections: 1,478 million kgMS, down 4%
• NZ$13.7 billion delivered to the New Zealand economy through the Farmgate Milk Price pay-out to farmers
• FY23 Outlook: Forecast 2022/23 Farmgate Milk Price range of NZ$8.50–$10.00 per kgMS, with a midpoint of NZ$9.25 per kgMS. Forecast 2022/23 normalised earnings guidance range of 45-60 cents per share.

Chief executive Miles Hurrell said despite the challenges including increased costs associated with supply chain volatility, 2021/22 was "a good year for the co-op".

He said a series of geopolitical and economic events also affected the performance – including a NZ$80 million adverse revaluation of the co-op’s Sri Lankan business payables, due to the devaluation of the rupee.

"These results demonstrate that our decisions relating to product mix, market diversification, quality products and resilient supply chain, mean the Co-op is able to deliver both a strong milk price and robust financial performance in a tough global operating environment."

He said as part of the strategic review of the ownership of our milk pools outside New Zealand Fonterra continued "to make progress", with the sales process for its Chilean Soprole business.

"Meanwhile, we’ve looked at a number of options for our Australian business and have decided that it’s in the co-op’s best interests to maintain full ownership.

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

As part of Fonterra's strategy to 2030, the co-op had set a goal of a return of about $1 billion to shareholders and unitholders, which anticipated divestments including Soprole and a stake in the Australian business.

"Even though we have decided not to sell a stake in our Australian business, we are still committed to targeting a significant capital return to our shareholders and unitholders. The amount of any capital return will ultimately be determined on a number of factors including the successful completion of the divestment programme as well as our ongoing debt and earnings levels," Hurrell said.

See dairy payout history and economists' price predictions.

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Has anyone done any analysis on debt to ebit ratios for listed company's and where Fonterra comes out? My guess it is still quite high?