Fonterra has increased its forecast earnings for the 2015 financial year.
The co-operative is now expecting to pay farmers $4.95-5.00 per kg of milk solids.
Chairman John Wilson said performance between the 1 August – 31 October 2015 built on the strong second half of the financial year ending the 30 June 2015.
“While it’s tough on farm due to low global milk pieces, farmers will welcome the ongoing improvement in Fonterra’s performance delivering increased returns,” said Wilson.
“Performance is well ahead of last year and we are hitting our targets on gross margins and operating and capital expenses.”
“At the same time, the acceleration of business transformation initiatives is generating significant cash savings. We are on track, and therefore able to lift our forecast earnings per share range.”
Milk volumes
Fonterra has also stated it is expecting a reduction in milk collections in New Zealand of at least 5 per cent, which is equivalent to approximately 150, 000 MT of whole milk powder.
Chief Executive Theo Spierings said that since August, Fonterra had reduced the amount of product it expected to offer on the GlobalDairyTrade (GDT) platform over the year by 146, 000 MT.
“In addition, an increased proportion of product is being sold through bilateral customer agreements for a premium on prices achieved on GDT. Ingredients inventory levels for the first quarter are in line with the same period last year,” said Spierings.
“We are benefiting from the investment in new plants in New Zealand, which is improving our manufacturing options and reducing peak costs. Our strategy is moving greater volumes of milk into higher-returning products to take advantage of improved prices relative to Whole Milk Powder.”
Overall business performance
Spierings said performance in the first quarter of the 2016 financial year built on the strong finish to the 2015 year with margins increasing across the group from 14 per cent to 23 per cent compared to the same period last year.
“Our first quarter ingredients performance reflects improved product stream returns and margins are tracking well. With less milk this season, and additional capacity, we have taken the opportunity to optimise our product mic,” said Spierings.
“We are delivering continuing growth in consumer ad foodservice sales volumes and value, particularly in Greater China, Asia and Latin America.”
