Wednesday 17th March 2021
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Fonterra has advised that the core financial targets for the current financial year are a return on capital of 6 to 7%, a debt to EBITDA ratio of 3 to 3.5 times, and a gearing ratio of 36 to 40%. It considers it is on-track to achieve these targets. Key to this has been the improved underlying performance, which can be seen in the $100 million increase in Total Group normalised EBIT on the comparative period.
Fonterra has used its scale and the breadth and diversity of its markets and products to its advantage, moving milk to where the most value can be created. This can be seen in the improved Total Group normalised gross margin, which has increased from 16.0% to 17.4%, while keeping control of operating expenses. Fonterra’s profit after tax has also benefited from lower average debt and a reduction in global interest rates.
The Greater China business increased normalised EBIT by 38% to $339 million. This reflects the strength of the Foodservice channel, an improved performance in the Consumer channel and China’s strong economic recovery following the initial impact of COVID-19. Asia Pacific’s normalised EBIT is up 9% to $190 million and this is predominantly driven by people cooking more with dairy and Fonterra’s renewed focus on its Consumer brands. AMENA’s normalised EBIT is down 7% to $201 million due to reduced sales volumes and lower gross margins in the Ingredients channel. The lower sales volume reflects Fonterra making the most of its ability to move milk into higher returning markets and products.
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