Fonterra Boosts FY25 Farmgate Milk Price Forecast, Maintains Earnings Guidance
Source: DairyNews.today
Fonterra Co-operative Group Ltd has reported a net profit of NZD 263 million for the first quarter of its 2024-25 financial year, equating to earnings of 16 cents per share.
Chief Executive Miles Hurrell characterized the results as a strong start to the year, particularly in the context of higher milk costs and narrower price differentials compared to the same period last year.
“While these factors have impacted our gross margins, we’ve partially offset this by optimizing our product mix, focusing more on higher-value products in our Foodservice and Consumer channels,” Hurrell said.
The cooperative entered FY25 with well-managed inventory levels, leading to reduced stock levels at the start of the year. This has contributed to lower sales volumes in the Ingredients channel, which was also affected by narrowing price relativities in New Zealand. However, this was partly mitigated by aligning the Australian milk price with global commodity trends.
“While the higher cost of milk has pressured gross margins in our Foodservice and Consumer channels compared to Q1 last year, it is encouraging to see margin improvements in our global markets since the end of FY24,” Hurrell added.
Farmgate Milk Price Forecast Raised
Fonterra increased the midpoint of its 2024/25 season Farmgate Milk Price forecast by 50 cents to NZD 10.00 per kilogram of milk solids (kgMS). The new price range stands at NZD 9.50 to NZD 10.50 per kgMS, reflecting robust global market demand.
“We remain committed to delivering the highest sustainable milk price to our farmers, and I’m pleased to announce another forecast increase,” said Hurrell. “Demand recovery in Greater China, coupled with strong performance in Southeast Asia, underpins this revision. Additionally, milk production challenges in the U.S. and Europe are supporting global supply dynamics, despite increased production in most regions of New Zealand.”
Fonterra noted that it is closely monitoring factors that could influence global market conditions, including geopolitical risks.
Earnings Guidance Held Steady
The cooperative’s earnings forecast for FY25 remains unchanged at 40-60 cents per share.
“This range reflects expectations for stable underlying operating profit, supported by improved sales volumes, product mix, and pricing to counter the higher cost of milk in the second half of the year,” said Hurrell.
The unchanged guidance also accounts for Fonterra’s new tax status, effective this financial year, which will reduce reported earnings per share.
“While these factors have impacted our gross margins, we’ve partially offset this by optimizing our product mix, focusing more on higher-value products in our Foodservice and Consumer channels,” Hurrell said.
The cooperative entered FY25 with well-managed inventory levels, leading to reduced stock levels at the start of the year. This has contributed to lower sales volumes in the Ingredients channel, which was also affected by narrowing price relativities in New Zealand. However, this was partly mitigated by aligning the Australian milk price with global commodity trends.
“While the higher cost of milk has pressured gross margins in our Foodservice and Consumer channels compared to Q1 last year, it is encouraging to see margin improvements in our global markets since the end of FY24,” Hurrell added.
Farmgate Milk Price Forecast Raised
Fonterra increased the midpoint of its 2024/25 season Farmgate Milk Price forecast by 50 cents to NZD 10.00 per kilogram of milk solids (kgMS). The new price range stands at NZD 9.50 to NZD 10.50 per kgMS, reflecting robust global market demand.
“We remain committed to delivering the highest sustainable milk price to our farmers, and I’m pleased to announce another forecast increase,” said Hurrell. “Demand recovery in Greater China, coupled with strong performance in Southeast Asia, underpins this revision. Additionally, milk production challenges in the U.S. and Europe are supporting global supply dynamics, despite increased production in most regions of New Zealand.”
Fonterra noted that it is closely monitoring factors that could influence global market conditions, including geopolitical risks.
Earnings Guidance Held Steady
The cooperative’s earnings forecast for FY25 remains unchanged at 40-60 cents per share.
“This range reflects expectations for stable underlying operating profit, supported by improved sales volumes, product mix, and pricing to counter the higher cost of milk in the second half of the year,” said Hurrell.
The unchanged guidance also accounts for Fonterra’s new tax status, effective this financial year, which will reduce reported earnings per share.
