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Fonterra has released interim results for 2019 showing that the co-op has returned to profitability with a net profit after tax (NPAT) of $80m.
However, normalised earnings before interest and tax (EBIT) are down 29% compared with the same time last year.
Fonterra CEO Miles Hurrell admitted that the co-op was not where it should be in terms of earnings performance.
Consumer and Foodservice is tracking behind last year
“The steady performance from New Zealand Ingredients in the first half of FY19 has been offset by challenges in Australia ingredients and this has seen our total Ingredients EBIT decline by 17% to $461m,” Hurrell said.
“Our Australia ingredients business continues to feel the impact of the drought. We can see it in the decline of Australian milk collections and aggressive price competition for milk, which is resulting in the underutilisation of manufacturing assets and tightening margins.
“Consumer and foodservice is tracking behind last year with an EBIT of $134m.”
The farmgate milk price is forecast for $6.30 to $6.60 per kgMS.
Last year’s accounts
Last year, Fonterra showed a €110m net loss after tax for the 2018 financial year.
The co-op wrote €247m off the value of its Chinese subsidiary, Beingmate, the infant formula company, and paid Danone €131m in compensation for a past food safety scare.
Portfolio review
As part of its portfolio review, the dairy processor has announced that it has started a sales process for 50% of their share of DFE Pharma.
It has a 50-50 share in DFE Pharma with FrieslandCampina, which has been notified of the sales process.
The processor also said that it is “actively” considering its options for its shareholding in Beingmate.
SHARING OPTIONS: