The world’s biggest dairy company, New Zealand’s Fonterra, will retain its Australian operations, deciding not to sell after putting them on the market for much of the year.
Despite some tire kickers, Fonterra appears to have concluded that its Australian business is too valuable and too closely tied to its core business in New Zealand.
Justifying to maintain Australian operations, Fonterra CEO Miles Hurrell said Australian consumer brands will play an important role in the company’s strategy to move up the value chain.
Fonterra Australia includes consumer brands such as Western Star Butter, Perfect Italiano and Mainland Cheese. It also operates the Bega cheese brand under a long-standing licensing agreement, although Bega Cheese is a dairy rival.
Analysts said the decision to keep the Australian business would reduce the NZ$1 billion capital to be returned to Fonterra shareholders and owners.
Fonterra is still looking to sell its operations in Chile, which were commercialized at the same time as those in Australia.
New Zealand analysts explained that Fonterra’s Chilean assets – dairy brand Soprole and its milk supplier Prolesur – do not require any New Zealand milk or expertise, while its Australian operations use both Australian and New Zealand milk. zealander.
“Australia plays an important role in our consumer strategy with a number of common and complementary brands and products and as a destination for our New Zealand dairy solids,” Hurrell said on Thursday. “The business is doing well and will play a key role in helping us achieve our 2030 strategic goals.”
The sale of the Australian and Chilean assets was a big part of the company’s strategy update released last year that looked to 2030 and promised a return on capital of $1 billion, much of which was to come from asset sales.
Fonterra also withdrew from China where he racked up big losses.
The retention decision for Australia came as Fonterra revealed their 2021-22 annual results.
Fonterra’s profit fell 3% to NZ$583 million in the year to the end of July. This included an NZ$80 million hit to his Sri Lankan business following economic disruption there.
With half-year results down 7%, the lesser annual decline indicates a better performance in the second half.
Revenue rose 11% to NZ$23.4 billion, but sales volumes fell due to short-term shifts in demand and continued disruptions to shipping and supply. Operating expenses rose 7% to $2.4 billion, reflecting inflationary pressures and supply costs.
Fonterra will pay a final dividend of NZp 15 ca share, bringing the annual dividend to NZp 20, unchanged from the previous year.
The co-op confirmed its final farmgate milk price for the 2021-22 season was a record NZ$9.30 per kilogram of milk solids, pumping NZ$13.7 billion into the New Zealand economy. This was significantly higher than NZ$7.54 per kgDM the previous season.
For the coming season, the cooperative has forecast a milk price of NZ$8.50-10 per kgDM, suggesting a near-record payment of NZ$9.25 per kgDM to dairy farmers.