Strong profit for Fonterra in difficult year

Fonterra has emerged from dairying's toughest year in living memory in a buoyant mood. The cooperative was yesterday praising its management of a year in which commodity prices plummeted as farmers produced more milk reports Stuff. It confirmed the payout to farmers for the year to July 31 would be $5.20 a kg of milksolids, well down on the $7.90 record high of the year before. But it also pointed to a stronger balance sheet, reduced stockpiles and improved performance in adding value to its basic products. With a recovery in commodity prices now underway and a lift in the payout forecast for this year to $5.10, the company's leadership was upbeat. Chairman Sir Henry van der Heyden said Fonterra's strategy of "combining a broad business footprint, a powerful sales network, strong customer relationships and valued brands" was delivering more profit to farmers. He said the company had weathered business challenges and market volatility that were probably unique in the lifetimes of anyone involved in dairying. However, the company had decided to hold onto stocks and wait for a lift in the market. This had come momentarily early this year when exchange rates took a brief favourable turn. Now inventories were down and the debt ratio had fallen from a high of 61.5 per cent in January to 52.7 per cent at July 31. Chief executive Andrew Ferrier said a solid performance in both the consumer brands and ingredients businesses had driven a strong growth in profits and had lifted the value-added proportion of the payout, from 31c to 49c. This had added $603 million to the distributable profit, compared with $364m the previous year. Overall, more than $6.3 billion would be distributed to farmers.