The company said that its strong growth in earnings was due to how well its protein portfolio did, especially in medical nutrition. It thinks that the price of milk at the farm gate will be between $8.50 and $9.50 per kg of milk solids, with $9 as the middle point.
The CEO of Fonterra, Mike Hurrell, said that it was a good start for the company given what was going on in the world at the time.
“Geopolitical and macroeconomic events continue to have an effect on us, with higher costs at every point in our supply chain,” he said. “The story is the same on the farm, where our farmer shareholders have to deal with much higher input costs.”
Hurrell said that milk supply from key exporting regions like Europe, Australia, and the US has been down over the past year, and production in New Zealand is down 2.9% compared to the same time last season.
China’s “softening of demand” for whole milk powder is due to changes in the stock market.
“We’ve seen more people from other places joining in, which has helped to make up for some of the drop in demand from Greater China,” he said. “We’re happy with our sales contract rate, even though it’s still early in the fiscal year.”
Hurrell said that the company’s ingredients business is still making a lot of money from its protein products, especially casein and caseinate, which are used in medical nutrition. Last year, underlying earnings went up 94% to $368 million, and normalised profit after taxes went up 84% to $214 million.
“The stable high margins in our protein portfolio give us the confidence to raise our earnings guidance, even though the wider range reflects the market’s volatility, which we expect to continue in the short to medium term.”
“If these conditions last for a long time, it could be good for earnings forecasts in a different way.”
People said that the dairy cooperative did better in the food service channel compared to the same time last year. Still, the high cost of milk continues to put a lot of pressure on both retail and food service margins.
Hurrel said that the company had made progress on shipping the extra inventory at the end of the company’s fiscal year, and that the stock had returned to normal levels.
“There’s no doubt that the world is becoming more uncertain. Pressures from inflation are being felt both on the farm and in our business as a whole, but the fundamentals of the dairy industry are still good, he said.
