PREMIUM

Fonterra reviewing Australian business

Photo by Julie Mercer

New Zealand-based dairy business, Fonterra, has confirmed it is reviewing the ownership of its Australian business as part of a long-term strategy.

The company had flagged its review in September last year and also gave notice of its intention to sell a Chilean-based business.

“We are continuing our ownership review of our Australian business and the divestment process for our Chilean business, Soprole, is under way,” chief executive officer Miles Hurrell said in a regular business update.

“We’re taking our time to ensure the best outcomes for both businesses and remain confident on delivering on our intention to return around $1 billion of capital to our shareholders and unit holders by the 2024 financial year,” Mr Hurrell said.

Last year Mr Hurrell said the Australian business remained important to the co-op.

“By having access to ongoing external capital, we believe the Australian business will be best placed to deliver on its strategy and capture its full potential, at the same time as unlocking capital for the co-op,” he said.

In the latest corporate update, Mr Hurrell said the long-term outlook for dairy remained positive, despite recent geopolitical and COVID-19 related events impacting global demand in the short-term.

“On the supply side, growth from key milk producing regions is expected to remain constrained as high feed, fertiliser and energy costs continue to impact production volumes,” he said.

“These demand and supply dynamics are expected to support dairy prices in the medium to long-term.

“However, we are operating in an increasingly volatile global environment and are managing a wider range of risks than usual.”

For the 2021-22 season, Fonterra has maintained its 2021-22 forecast farm gate milk price of $9.10 to $9.50/kg MS.

For the nine months ending April 30, Fonterra’s sales volumes were down as a result of lower milk collections and the timing of sales due to short-term impacts on demand including the COVID-19 lockdowns in China, the economic crisis in Sri Lanka and the Russia-Ukraine conflict, Mr Hurrell said.

Total group normalised earnings before interest and tax was $825 million, down $134 million, reflecting lower sales volumes, continued pressure on margins from the significantly higher milk price, ongoing COVID-19 disruptions and the rapid decline of the Sri Lankan rupee.