Fonterra Q1 Sours, Lowers Milk Price Range Again

By Glenn Dyer | More Articles by Glenn Dyer

NZ dairy giant, Fonterra has downgraded its 2018-19 forecast Farmgate Milk Price range for a second time in as three months as global prices and demand remain weaker than forecast.

Fonterra also revealed a dip in profits and revenues for the first quarter.

The dairy group said its new farmgate price would fall from the previously struck $NZ6.25-$NZ6.50 a kilogram of milk solids to $NZ6.00-$NZ6.30 per kilogram.

The 25 cent milk solid price cut would cost NZ more than $NZ450 million in a full year, or around $NZ1 billion for the two reductions in the past couple of months.

The company said its outlook was being clouded by the impact of the drought on its Australian operations.

“In our Australian Ingredients business, we have lower milk collections as a result of drought conditions and increased competition for milk supply. We are responding by focusing on the performance levers in our control – the main one being reducing our operating expenses to reflect lower milk collections.”

Fonterra said its first-quarter gross profit margin was down $NZ14 million on the same period last year.

The dairy giant posted a $NZ646 million gross margin for the quarter on revenue on a 4% drop in revenue to $NZ3.8 billion.

The first quarter figures follow its first ever loss of $NZ196 million for the 2017-18 financial year.

The September loss was largely due to a $NZ405 million write-down of its Chinese investment Beingmate and $NZ183 million in damages to French dairy giant, Danone following a court case in relation to the 2013 botulism scare.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →