Fonterra is paying its second-largest dividend in its history. How the diary co-operative's finances and future have changed. Video / Editing | Corey Fleming
Since Fonterra’s reset in 2018, which forced it to divest assets around the world, its debt levels have halved and its earnings per share have increased.
The improvement has allowed the dairy co-operative to afford its second-largest annual dividend in its history of 55 cents per share, including a 15 cents special dividend.
“We’ve been on a journey for sort of the last four or five years and getting the business into good shape.” Fonterra chief executive Miles Hurrell told Markets with Madison.
“When you get your balance sheet under control, that gives you the option and it gives you the flexibility.“
Fonterra CEO Miles Hurrell and chairman Peter McBride talking to Markets with Madison at the dairy co-op's annual result press conference this week.
The dairy co-operative, which is owned by farmer supplier-shareholders, made a net profit after tax of $1.1 billion in the financial year just ended, compared with a record $1.6b last financial year.
Its net debt was now $2.6b, with a gearing ratio of 24%, down from 48% in 2018.
Hurrell announced a strategic reset of the exporter in 2018, when the company made its first annual loss since its inception and was on notice with ratings agencies.
Since then it had unwound its ownership in Beingmate and sold out of its loss-making China Farms venture, Chilean business Soprole, its DPA Brazil joint venture with Nestle and its Tip Top ice cream business.
Fonterra's iconic Anchor brand could come under new ownership if the sale of its consumer division progresses.
It was now considering selling its entire consumer division, which included household dairy brands Anchor, Mainland and Kapiti among others.
A sale would leave Fonterra with just two divisions - ingredients and foodservice - so how profitable would the co-operative be with what’s left?
Watch Miles Hurrell and chairman Peter McBride discuss Fonterra’s finances and future on today’s episode of Markets with Madison above.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Reidy is the host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
