Fonterra to exit consumer business, lifts milk price forecast
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The news: New Zealand dairy giant Fonterra has confirmed plans to divest its global consumer business along with businesses in Oceania and Sri Lanka, and has lifted its forecast for full-year farmgate milk price.
The numbers: The dual-listed dairy giant raised the midpoint of its 2024/25 season forecast milk price to NZD9.50 ($8.60) from NZD9 earlier, on the back of stronger demand.
Separately, the company said it will proceed with either a trade sale or an initial public offer for the global consumer business and Fonterra Oceania and Fonterra Sri Lanka businesses, which collectively contributed 19% of Fonterra's group operating earnings in the first half of FY24.
The context: Fonterra first announced it was exploring a divestment of the businesses in May, and the latest decision follows a month’s-long assessment. The global consumer business includes Anchor, Mainland, Fernleaf, Western Star, Perfect Italiano and other brands.
CEO Miles Hurrell said the co-operative received meaningful buyer interest for the businesses on the block and a final decision on the divestment pathway will depend on several factors, including long term value.
“We will thoroughly test the terms and value of both a trade sale and IPO with the market before seeking support from farmer shareholders for a divestment option through a vote,” he told investors, adding Fonterra is targeting a significant capital return.
Meanwhile, Fonterra is seeing stronger demand out of China, where domestic production is likely to be below expectations, and also from Africa, Middle East and Southeast Asia, Hurrell said.
