Fonterra Co-operative Group has reported a drop of $899 million, or 27 per cent, in its fiscal third-quarter net profits.
The decrease in profits can be attributed to the fact the prior period included the performance of Soprole as well as Fonterra’s net gain from the $981 million sale of Soprole to Gloria Foods.
Miles Hurrell, CEO of Fonterra, said the Co-op’s foodservice and consumer channels had a strong third quarter with a lift in earnings compared to the same time last year.
“As a result of this performance, we have lifted our forecast FY24 continuing operations’ earnings range to 60-70 cents per share, up from 50-65 cents per share.
“Fonterra’s sales volumes were up slightly on last year by 38kMT, or 1 per cent, due to higher sales volumes in our foodservice and consumer channels.”
The co-op’s consumer and foodservice channels saw volume increases of 7 per cent and 4 per cent respectively year-on-year, while ingredients were down.
“Our increased earnings range assumes softer earnings in Q4 due to the seasonality of our milk collections, the higher cost of inputs in the foodservice and consumer channels, and the impact of the investments in modernising our IT systems.
“Across Fonterra, operating expenses are up due to inflation, upfront costs of driving efficiency improvements and increased IT spend. Historically, some of this IT spend would have been treated as capex and capitalised on the balance sheet,” explained Hurrell.
Hurrell said the co-op is heading into year end with a strong balance sheet, with Fonterra’s underlying performance and lower debt position helping to further reduce its financing costs.
Fonterra previously announced that it was exploring full or partial investment options for some or all of its global consumer and integrated businesses, including Fonterra Oceania and Fonterra Sri Lanka.
“Following our announcement earlier this month of a step-change in our strategic direction, we have received a high volume of interest from parties looking to be involved in the potential divestment of our consumer and associated businesses.
“It’s still early days in this process, and we commit to providing farmer shareholders, unit holders, our people and the market updated on new developments as they occur,” said Hurrell.
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