Fonterra 2012 Results: Record Supplies Offset Price Reduction

NEW ZEALAND - Fonterra has reported a nine per cent increase in pre-tax profits of NZ$677 million for the 2012 financial year, driven primarily from growth in export markets and strong performance in the domestic market.
calendar icon 4 October 2012
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Total sales volumes increased two per cent to 3.94m metric tonnes (MT), driven by an 11 per cent increase in export volumes, which totalled 2.32m MT. These were supported by record milk flows in the year with total deliveries reaching 1,493m kilograms of milk solids (kgMS), 11 per cent up on the previous season.

Total revenues were flat at NZ$19.8 billion (NZ$19.9 billion in previous year), despite higher volume sales. Earnings were negatively impacting in the Australian market due to difficult trading conditions while the strong NZ dollar reduced export earnings from Asian and Middle Eastern markets. Strong performance in the domestic market and Latin America however meant overall earnings remained similar to the previous year.

In light of its financial performance for the year, the Fonterra Co-operative Group announced its farmgate milk price declined from $7.90kgMS in 2011 to $6.40kgMS. In August 2012, Fonterra announced a forecast Farmgate Milk Price of $5.25kgMS for the 2012/13 season. Although there has been a nine per cent increase in average prices over the last two GDT events, this recovery had been accounted for in the price forecast and has been partly offset by further appreciation of the NZ dollar versus the US dollar.

Announcing the result, Chairman Sir Henry van der Heyden said the 2012 year had been one out of the box for dairy: “All around the world, we saw record dairy production which was mirrored back here in New Zealand.

“Global dairy demand held up reasonably well but this ocean of milk obviously impacted on global commodity prices, with the GlobalDairyTrade (GDT) index reaching its lowest value in 34 months in May.

“This contributed to a lower Farmgate Milk Price in the 2012 year, however, the impact of this decline on overall earnings for farmers has been eased a little by the much higher volumes of milk they produced.”

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