Fonterra boosts performance

by Paul Campbell

Fonterra Co-operative Group Limited has announced its 2020 Interim Results, which show the co-operative’s financial performance has improved with increased underlying earnings and reduced debt.

CEO Miles Hurrell says Fonterra has continued to reset its business, introducing a new strategy, reorganising and resizing its teams, so there is a greater focus on customers, and at the same time, significantly lifting its financial performance.

“While there’s no doubt the world is experiencing an almost unprecedented situation and response to Covid-19, I’m pleased with the progress we’ve made so far against our four priorities for 2020. These are to hit our financial targets, reduce our environmental footprint, build a great team and support regional New Zealand. By achieving these, we will make strides towards our long-term goals of healthy people, a healthy environment and healthy business.”

Fonterra’s key financial targets for 2020 are to meet its earnings guidance of 15–25 cents a share, achieve a gross margin in excess of $3 billion, reduce debt, so it is no more than 3.75x its earnings and ensure capital expenditure is no more than $500 million.

Mr Hurrell says he is pleased with the progress and momentum in the first six months of the financial year. However, Fonterra is now operating in a very different global context as a result of Covid-19.

“Our total group normalised earnings for the first six months of the 2020 financial year are up — $272 million on last year to $584 million. Our foodservice business has definitely been our stand-out performer in the first half as we’ve grown our sales to bakeries and coffee and tea houses across greater China and Asia.

“We continue to reduce our debt. We completed the sale of DFE Pharma and Foodspring in the first half of the year with cash proceeds of $624 million, and this has helped reduce net debt by 22% or $1.6 billion, compared to this time last year.”