Fonterra is celebrating a great year with a hefty profit for 2024. The company’s chair Peter McBride said this success results from the leadership team’s hard work.
The company’s profit was $1.128 billion after tax. It announced a 55 cent per share dividend and raised the expected milk price for the 2024-2025 season by 50 cents, bringing it to a new middle point of $9 per kilogram of milk solids (MS).
McBride mentioned that farmers have had a tough few years, with some struggling to break even. He was happy to share the positive news, saying, “We’re pleased to announce these results.”
Fonterra’s CEO, Miles Hurrell, added that 2024 was a strong year and continued the excellent progress from 2023. He also pointed out how much Fonterra has improved since 2018, when they lost $196 million.
When asked if they looked back at their success, Hurrell said the team is always focused on the future and working toward long-term goals. They are now planning for 2027-2029.
Reflecting on the past, Hurrell recalled how hard things were in 2018. The company had to simplify its business and focus on its primary goals. He emphasized how important it is to Fonterra that they are cooperative. Everything they do impacts rural areas in New Zealand, and that’s something special.
The 55 cents per share dividend comprised a 15-cent interim dividend, a 25-cent final dividend, and a 15-cent special dividend. Hurrell explained that the special dividend was due to better capital management and a strong balance sheet.
The final milk price for 2023-2024 was $7.83 per kilogram of milk solids, the fourth-highest in Fonterra’s history but still lower than the last two years. The total payout for fully shared-up farmers was $8.38 per kilogram, which is close to what farmers need to break even.
For the current season, the forecasted milk price is between $8.25 and $9.75 per kilogram, with expected earnings of 40-60 cents per share.
Fonterra’s continuing operations earnings were 70 cents per share, and they reported an EBIT (earnings before interest and tax) of $1.56 billion, down from $1.75 billion the year before. Net debt has decreased to $2.6 billion, half of it five years ago.
Hurrell shared that he’s received much positive feedback from farmers about the new forecast. “My phone has been ringing all morning. After a couple of hard years, this news is very welcome.”
McBride was a bit more cautious, saying that while the $9 forecast is good news, it’s not the same as it would have been a few years ago because farmers still face high interest rates, fertilizer, and labor costs.
He added that those costs are starting to decrease, so farmers’ profits are improving. “This is a step in the right direction, and farmers will be happy with the announcement. Cash flow is significant, so this is positive, but we must keep things in perspective.”