Fonterra strengthens balance sheet

Thursday 23rd September 2010 1 Comment

Fonterra announced the strongest balance sheet in its 19-year history after allowing farmers to buy more shares and affirmed its 2011 milk fat payment.

The Auckland-based dairy group's gearing ratio shrank to 44.9% at July 31, from 53% a year earlier, reflecting an inflow of $459 million in additional shares and increased retentions. Net debt fell to$4.5 billion from $5.2 billion.

Net profit rose 12% to $685 million, including $174 million of one-time gains from asset sales. Its gross payment to farmers is $6.70, including $6.10 per kilogram of milk solids and a higher-than-expected distributable profit 60 cents per cooperative share. Of that, 33 cents is retained by Fonterra.

Its 2011 milk fat payment was affirmed at $6.60 a kilogram, though it lifted forecast distributable profit to a range of 40-50 cents from a previous forecast 30-50 cents.

"Fonterra has come through the recession well." Chairman Henry van der Heyden said.

"Although business conditions remained volatile, customer demand returned and international dairy prices rose sharply."

Sales in the latest year climbed 4.3% to $16.7 billion, with the improvement reflecting a 7% increase to $11.2 billion for Commodities & Ingredients. Revenue at its consumer businesses was little changed at $5.5 billion, mainly reflecting adverse currency movements.

Chief executive Andrew Ferrier said there are signs supply and demand in global markets are moving more into balance at current prices though there is still "considerable volatility".

The cost of goods sold rose to rose to $14 billion from $13.2 billion a year earlier.

Farmers have increased their share holdings after approving a plan that allowed them to hold up to 120% of their annual production. The cooperative is preparing to allow farmers to trade the shares among themselves, ending its redemption risk.

Businesswire.co.nz

Comments from our readers

On 23 September 2010 at 2:06 pm J P said:

Fonterra came about thru the merging of Kiwi in hawera, and Anchor in Hamilton. This was not 19 years ago. Perhaps 7-9 years. As a farmer I get very annoyed to note it as Auckland based. we had, as I presume Anchor had very adequate offices. The clowns who now run Fonterra like living in ivory towers, which the farmer has to pay for. Bring back Norgate at least he understood the business