Fonterra keeps FY guidance despite Q1 earnings drop
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The news: New Zealand dairy giant Fonterra has maintained its full-year earnings guidance, despite a drop in first-quarter profit, and again lifted its forecast for full-year farmgate milk prices.
The numbers: The dual-listed dairy producer reported first-quarter net profit of NZD263 million ($239 million), down from NZD346 million a year ago, while earnings per share was down to 16 NZ cents from 20 NZ cents a year ago.
However, it has reaffirmed full-year guidance for earnings per share to be 40 to 60 NZ cents a share, and raised its 2024/25 season forecast milk price for the second time in a month to NZD9.50 to NZD10.50 from NZD9-NZD10 earlier.
The context: Fonterra attributed the weaker Q1 performance to lower sales volumes, reflecting lower opening inventory following a strong finish to FY24, and said its gross margins were impacted by the higher cost of milk. The co-operative raised its milk sourcing price further amid ongoing strength in the global market.
“We are seeing a recovery of demand in Greater China as domestic milk production rebalances and demand from Southeast Asia continues to be strong,” CEO Miles Hurrell said. He expects improved sales volumes, product mix and pricing to offset the higher cost of mil in the second half.
