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Fonterra Co-operative Group Ltd elevates FY24 outlook with robust start to the year

China 07.12.2023
Source: The DairyNews
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Fonterra Co-operative Group Ltd announced an upward revision of its forecast Farmgate Milk Price and earnings guidance for the fiscal year 2023/24, driven by a strong performance in the initial quarter.
Fonterra Co-operative Group Ltd elevates FY24 outlook with robust start to the year
The midpoint of the forecast Farmgate Milk Price for the season is now $7.50 per kgMS, up by 25 cents, with the range adjusted from $6.50-$8.00 per kgMS to $7.00-$8.00 per kgMS.

Fonterra CEO Miles Hurrell attributed the revised forecast to increased demand for reference commodity products in key importing regions, particularly noting improvement in demand from China during the first quarter. Hurrell expressed confidence in the market dynamics, citing elevated Global Dairy Trade prices and a well-contracted sales book for the current period.

Despite acknowledging potential volatility in commodity prices, Hurrell emphasized a vigilant approach to market dynamics and committed to providing timely updates. The Co-op reported strong earnings for the first quarter, underpinned by enhanced performance in all three sales channels.

Hurrell announced a 5-cent per share increase in the midpoint of the forecast earnings for the fiscal year, ranging from 50 to 65 cents per share, attributed to robust performance in the Co-op's Ingredients, Foodservice, and Consumer channels. Notably, profit after tax surged by 85% to $392 million, equivalent to 24 cents per share, and EBIT witnessed a 63% increase to $575 million.

Higher margins across key channels, particularly in Foodservice and Consumer, contributed to the improved earnings, with gross margin escalating from 15.5% to 21.4%. While New Zealand Ingredients demonstrated consistent strength, Australia Ingredients experienced lower margins. Hurrell anticipated sustained higher margins in the first half of the year, with a subsequent tightening in the second half due to increased input costs and a narrowing gap between reference and non-reference product prices.

The CEO highlighted the Co-op's strategic progress during the first quarter, including the return of 50 cents per share and unit following the Soprole sale completion.These earnings are from continuing operations and exclude the performance and impact of selling DPA Brazil.

Hurrell expressed satisfaction with the first-quarter results, emphasizing positive momentum as Fonterra progresses towards its 2030 goals.
July 2024
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