Fonterra has delivered a half year profit after tax of $364 million, down 7% year-on-year.
The co-operative says the higher milk price put pressure on margins in its foodservice and consumer markets and it was also impacted by COVID-19.
Lower New Zealand milk collections reduced its total production and this impacted overall sales volumes, it says.
Total group normalised earnings before interest and taxes was down 11% to $607m and total revenue was up 9% to $10.8 billion.
It will pay dividend of five cents alongside a record high forecast Farmgate Milk Price in the range of $9.30 to $9.90 per kilogram of milk solids.
Fonterra chief executive Miles Hurrell says the co-op is performing well with good momentum and has continued to see strong demand for its products across multiple markets despite constrained supply.
“Our earnings have been achieved at a time when our input costs have been significantly higher with the average cost of milk up almost 30% on the same time last year. This shows we’re performing well even with a high Farmgate Milk Price.
“The board’s decision to pay an interim dividend will be welcome news for our unit holders and farmer owners.
“The milk price is also good news for our farmer owners and the New Zealand economy – a midpoint of NZ$9.60 would see the co-op inject over $14 billion into our local communities through milk price payments alone.
“COVID-19 continues to be a challenge in our markets and here at home. We’re seeing more of our employees having to isolate and continued disruptions in our supply chain,” Hurrell says.
“However, by caring for our people and good management and planning, our manufacturing plants have continued to operate and we are getting products to our customers.”
Looking ahead, Hurrell says the supply and demand outlook should underpin a strong milk price next season.
“There are a number of risks we are continuing to watch closely. The conflict in Ukraine has added to an already complex COVID-19 operating environment, impacting global supply chains, oil prices and the global supply of grain.
“However, our lower debt levels mean we are in a stronger position to weather the heightened levels of uncertainty and market volatility the world faces right now,” he says.
