The world’s biggest dairy exporter said rivalry cut its Australian margins, while sales grew in the rest of the world.
Normalised earnings before interest and tax fell three per cent to $NZ1 billion ($A897.42 million), the Auckland-based company said on Wednesday, meeting the guidance it gave on July 25.
Sales fell six per cent to $NZ18.6 billion and net profit rose 18 per cent to $NZ736 million.
It recorded a small fall drop in full-year earnings before interest and taxes to $NZ494 million from its largest business, NZ Milk Products, as a strong first half gave way to a drought-afflicted second half, which cut milk collection by nine per cent and caused a spike in its own milk costs.
«The extreme drought caused unprecedented volatility – reflected in a 64 per cent spike in whole milk powder prices from January 2 to April 16,» chief executive Theo Spierings said.
He said the company faces some headwinds in the first half of the current year, which will be below the same period of 2013.
Days after the end of Fonterra’s financial year, the dairy company announced a recall of whey protein concentrate after initial tests suggested it was contaminated with a potentially deadly botulism. While followup tests showed the bacterium was a harmless strain, Mr Spierings said lessons had been learned.
«The precautionary recall challenged the co-operative but has also provided an opportunity to make a profound change for the better,» Mr Spierings said.
Fonterra gave no detail of the likely costs of the recall.
The company’s Australia and New Zealand business posted a 37 per cent slump in EBIT to $NZ142 million.
The unit recognised $NZ30 million of costs from the closure of its Cororooke facility in Australia and $NZ19 million of restructuring costs.
Fonterra has already flagged restructuring in Australia, including the rationalisation of brands and plant closures to cut costs.
The company’s Asia/Africa/Middle East division, which includes its largest market of China, posted a 15 per cent increase in EBIT to $NZ209 million and sales rose three per cent to $NZ2 billion. Earnings in China climbed 20 per cent.
Latin America earnings rose to $NZ137 million on higher sales volumes and increased revenue.
Fonterra’s 2013 cash payout was $NZ6.16, reflecting a farmgate milk price of $NZ5.84 per kilogram of milk solids and a dividend of 32 NZ cents. On Tuesday it raised its forecast 2014 payout to $NZ8.62.
Source: News