Fonterra half-year results ‘none too shabby’

The half-year result for Fonterra Co-operative Group has been welcomed by Federated Farmers as excellent, given the unprecedented negative international trading environment.

“Fonterra’s result is much better than what could have been expected and its board and management should be applauded,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“It’s fair to say the words ‘implosion’ and ‘commodities’ have been inextricably linked since the world economy found a big deep hole last year, then jumped right into it.

“If Toyota, GM or a home appliance manufacturer presented numbers like this, they’d be cracking open the champagne. Whole milkpowder prices are down by a half yet Fonterra’s adjusted revenue is down by just 7.6 percent, when compared year-on-year.

“Fonterra has ridden itself hard controlling costs, as well as seeing some spectacular revenue growth from the ASEAN block especially. This vindicates the value add strategy and clearly demonstrates that innovation and agriculture go hand in hand.

“Fonterra is to New Zealand what Nokia is to Finland generating a quarter of all our exports. It really underscores just how important dairy is to every single New Zealander, though some people forget that fact.

“Despite being bullish, farmers are now acting with justified financial conservatism. A number are staring down at a loss for the current season after having their forecast payouts revised sharply downwards on two occasions. This has put a scythe through farm budgets.

“With the stellar months of December and January now reported in the first half results, Federated Farmers expects the outlook for the second half to be somewhat flatter. Farmers are putting capital projects on hold as they prioritise debt reduction.

“Tradespeople, who depend on farmers for revenue, have seen capital projects deferred and this is yet to fully reverberate throughout the economy. While the current forecast of $5.10 kg/MS remains the third best for this decade, input costs have risen sharply. Interest rates, fertiliser, fuel and council rates have all eaten away at profitability and margins are being squeezed.

“Let’s congratulate Fonterra for some alchemy in the current international trading environment. They deserve it,” Mr McKenzie concluded