New Zealand-based dairy cooperative Fonterra said reduced margins across the business saw its net profit slump by 11% in the year to 31 July.
Announcing its full-year results today, the world’s largest dairy exporter had net profit after tax of NZD 745 million ($542.4 million), compared to NZD 834 million the year before.
However, revenue rose to NZD 19.2 billion ($15.52 billion), up 12% from NZD 17.2 billion the year before. Rising prices were said to offset a 3% decline in volumes.
Despite lower milk volumes due to poor weather, Fonterra said there was stronger demand for its high value consumer products. Sales of its advanced ingredients segment were up 9% year-on-year.
Its customer and foodservice business also continued its strong performance, selling more than 5.5. billion liquid milk equivalents (LMEs), an additional 576 million LMEs on last year. This volume growth across these two portfolios delivered EBIT of NZD 614 million ($445 million), an increase of 6% on last year.
Fonterra chief executive Theo Spierings said: “We have been clear and single minded about delivering to strategy, leveraging our scale efficiencies and prioritising value and higher margin products. At the same time, we have tapped into the expertise of our people to come up with innovative ways to generate higher returns for the future.
“Within our ingredients business, our higher value advanced ingredients segment achieved a 9% increase in sales volumes. This includes sales of products such as functional proteins, high-spec whole milk powder and extra-stretch cheese. These advanced ingredients made up 19% of our total external sales volumes this year.
“Our new product development and strong customer relationships in our key markets is capturing more and more of our full potential in our consumer and foodservice categories.”
Mr Spierings added that, over the past year, Fonterra had commissioned or announced new investments across its consumer and foodservice product portfolio. This included new UHT lines at Waitoa, butter and cream cheese expansions at Te Rapa, construction of the Co-operative’s largest mozzarella plant at Clandeboye, two new cream cheese plants at Darfield, and the reopening of its cheese and whey plants at Stanhope in Australia.
“Foodservice, in particular, is a demand-led business and each of these investments is backed by a growing customer order book,” concluded Spierings. “Having the capacity and agility to quickly meet demand in this segment is critical to developing customer relationships and is our ticket to the game in many of our key markets.”
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