Fonterra gains 38% in H1 earnings
The Chinese market has continued to be the highlight for the first half-year fiscal report for world-leading dairy producer Fonterra Co-operative Group. According to Fonterra, innovations in product portfolio and applications to better serve customers and clients have contributed to the continuous growth of its performance in China. Fonterra China’s ingredients sector, the largest in its Chinese business, has focused on developing value-added products, thanks to rising health awareness in diet among local consumers as a result of the pandemic.
Innovations in product portfolio and applications to better serve customers and clients have contributed to the continuous growth of its performance in China
The Chinese market has continued to be the highlight for the first half-year fiscal report for world-leading dairy producer Fonterra Co-operative Group, with a 38 percent increase in earnings before interest and tax to NZ$339 million ($243.5 million), driven by its food service and consumer businesses and the country’s strong economic recovery following the impact of COVID-19.
According to Fonterra, innovations in product portfolio and applications to better serve customers and clients have contributed to the continuous growth of its performance in China.
Fonterra China’s ingredients sector, the largest in its Chinese business, has focused on developing value-added products, thanks to rising health awareness in diet among local consumers as a result of the pandemic.
Bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so
Of its nearly 20 new products innovated in the first fiscal half year, dairy protein, probiotics and cheese have been widely applied, driving up sales in this unit.
Its food service section has expanded to 22 new cities in the country, resulting in its network covering 372 cities and over 78,000 catering outlets.
“Our standout performer continues to be the Greater China market,” Fonterra CEO Miles Hurrell said. “As shown through our results today, the Greater China market continues to be one of our most important strategic markets. We remain committed to growing the value of our Greater China business, which we’ll do by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so.”
Speaking on the group’s 2021 Interim Results, the CEO said the co-op has had a great first six months of the 2021 financial year with total group normalised earnings before interest and tax up NZ$100 million to NZ$684 million, a total group normalised gross margin of 17.4 percent, up from 16 percent and total group normalised operating expenditure down NZ$37 million.
Fonterra has decided to undertake a sales process for joint venture farms in China
As part of Fonterra’s continuous review of its asset portfolio, Fonterra has decided to undertake a sales process for joint venture farms in China.
Hurrell said as with Fonterra’s own China farms, the decision to sell the joint venture farms is in line with the co-op’s strategy to focus on New Zealand milk.
“We expect the sales of our farms to be completed this financial year and the sale of the JV farms to be completed this calendar year.”
Fonterra also has continued to reduce its shareholding in Beingmate, which on Jan 31 was sitting at 3.94 percent and is now 2.82 percent.
Hurrell says Fonterra will continue to sell down its remaining shareholding and expects to have fully exited this investment before the end of this financial year.
“Fortunately, we are in a position, New Zealand dairy is proving to be resilient in a COVID-19 world. It’s a staple in people’s diets around the world and demand is strong, Hurrell said, referring to the second half of the financial year.
“Despite a strong first half, we are expecting our earnings performance to come under significant pressure in the second half,” he said.
About E. J. McKay
E.J.McKay is a Shanghai-headquartered investment bank with a special focus on mergers & acquisitions. We are one of the most long standing independent investment banks in China, with core business of mergers & acquisitions and financing advisory.