New Fonterra chief executive Theo Spierings has stamped his leadership on New Zealand’s biggest company, unveiling what industry players are calling its first real strategy along with a chunky half-year result.
The farmer-owned co-operative yesterday posted an 18 per cent increase in net profit after tax to $346 million, on revenue of $10billion, 7 per cent up on the same time last year.
Milk collection for the season to date is up 10 per cent, the result of a bumper grass growing season. This flowed into record production with a new export milestone achieved in December.
Spierings said Fonterra’s standard and premium ingredients businesses recorded a 44 per cent lift in normalised earnings before interest and tax, and a 10 per cent increase in revenue to $8b, achieved from higher sales volumes and a 10 per cent rise in average US dollar sales prices. Ingredient sales are 60 to 70 per cent of Fonterra’s business.
Earnings a share were up 14 per cent and Fonterra will pay an interim dividend of 12c a share, up from 8c in the same period last year.
Spierings, six months into the job as Fonterra, the world’s biggest dairy exporter, enters its second decade, announced a «refreshed» strategy based around forecast growth in global demand of at least 100billion litres of dairy product by 2020 and emerging economies’ hunger for safe, quality product and protein.
He said New Zealand could contribute only 5billion litres so «milk pools» would be developed overseas, to be integrated with its business in China, its largest market. The company would lose relevance globally if it did not develop such pools.
No specific locations were identified, though Spierings said overseas farms or factories did not have to be fully owned by Fonterra. «We can achieve the same result through partnerships and supply agreements, which is how we run our integrated businesses in Australia and Latin America.» New Zealand was forecast to produce 22billion litres by 2020; with milk pools it could contribute 8billion more litres to global supply by then.
Fonterra would also move higher up the value chain, selling more consumer-branded and nutrition products in emerging economies, particularly in China and Southeast Asian countries. Previously it has chosen not to go up against the likes of Nestle in the consumer brands market.
Fonterra’s $1b food service business will also get more attention. With more people eating out and on the run, it will invest in expanding this business in China, Southeast Asia, the Middle East and North Africa, while exploring potential in Chile and Brazil.
«A big part of this strategy refresh has been about making choices â€“ we can’t do it all. We want to make fewer bets and really focus our resources where we know we can win,» Spierings said.
– Â© Fairfax NZ News