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Highlights
- Fonterra held its annual shareholder meeting on 9 December.
- The Group is focusing on New Zealand milk, sustainability and dairy innovation.
- The Co-operative also revised its earnings guidance to 25-35cps.
Fonterra Cooperative Group (NZX:FCG) conducted its ASM on 9 December. The Group reported strong performance in 2021 on many fronts like financial, strategy implementation and shareholder relations.
FCG delivered an 8% rise in its EBIT to $952 million in FY21 while reducing net debt by $872 million. It also declared a final farmgate milk price of $7.54. This strong momentum also continued in Q1 of FY22.
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Fonterra’s Chairman stated that it was important for the Company to attain higher value for milk to compensate for rising input costs faced on-farm. Future for milk implies a highly sought-after product but an increasingly limited supply.
Fonterra increased its forecast Farmgate Milk Price range to $8.40-$9.00 per kgMS for the 2021/22 season and delivered an EBIT of $190 million in Q1 FY22.
Key 2022 priorities
FCG released its long-term strategy in September that outlined the strategic direction that the Company would move in, based on successful changes to its capital structure.
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Fonterra’s strategic priorities for 2022 include:
- Shifting from a reset to value growth.
- Divesting integrated Chilean business and preparing to decide an appropriate ownership mode for Fonterra Australia.
- Narrowing and prioritising areas within Nutrition Science Solutions.
- Achieving environment, people and business performance targets.
Targets ahead
Fonterra wants to achieve many key targets apart from attaining a sustainable market price, which includes the following-
- Increase operating profit by 40-50% from FY21.
- Steadily increase dividends to nearly 40-45cps by FY30, majorly supported by reduced interest from lesser debt.
- A Group Return on Capital of 9-10% by 2030, up from 6.6% last year.
- Increase spending on R&D by 50% to nearly $160 million a year by 2030.
Fonterra also intends to return nearly 60cps to shareholders and unitholders by FY24 through improved earnings and planned divestments.
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FCG also aims to authorise funding of $1 billion in shifting milk into higher-value products within its core business of Ingredients and Foodservice. The Group also plans to invest an extra $2 billion in further growth that includes prospects for nutrition science and potential returns to shareholders subject to the capital structure outcome.
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The Co-operative has also revised its earnings guidance to 25-35cps from 25-40cps as margins come under strain.
Bottom Line
Fonterra aims at growing value by reducing risks, benefitting from its competitive advantage while making business more sustainable.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)