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Fonterra has reported a net loss of $196 million for the July year.
The previous year’s net profit was $745 million.
The co-op said its normalised earnings before interest and tax was $902 million, down 22 per cent.
Fonterra said its total cash payout for the year would be $6.79, comprising a Farmgate Milk Price $6.69 per kgMS and a 10c dividend.
The co-op said its normalised gross margin fell to 15.4 per cent from 16.9 per cent.
Its return on capital fell to 6.3 per cent from 8.3 per cent, while its gearing ratio bumped up to 48.4 per cent from 44.3 per cent.
Chief executive Miles Hurrell says the co-operative’s business performance must improve.
“There’s no two ways about it, these results don’t meet the standards we need to live up to,” he said.
“In 2018, we did not meet the promises we made to farmers and unit holders,” he said.
At the interim results, Fonterra said it expected its performance to improve in the second half.
“We needed to deliver an outstanding third and fourth quarter, after an extremely strong second quarter for sales and earnings – but that didn’t happen,” he said.
Mr Hurrell says that in addition to the previously reported $232 million payment to Danone relating to the arbitration, and $439 million write-down on Fonterra’s Beingmate investment, there were four main reasons for the co-operative’s poor earnings performance.
“First, forecasting is never easy but ours proved to be too optimistic.
“Second, butter prices didn’t come down as we anticipated, which impacted our sales volumes and margins.
“Third, the increase in the forecast Farmgate Milk Price late in the season, while good for farmers, put pressure on our margins. And fourth, operating expenses were up in some parts of the business and, while this was planned, it was also based on delivering higher earnings than we achieved,” he said.
Fonterra’s Consumer and Foodservice business grew in all regions, except Oceania, with the strongest growth in Greater China.
Fonterra has said that it is undergoing a stocktake of the business, which will involve re-evaluating all its investments, major assets and partnerships.
– NZ Herald