Fonterra has upgraded its earnings guidance and lowered and narrowed its forecast milk price range to $8.50-$9.50kg of milk solids, with a midpoint of $9.
Yesterday, the company posted its first-quarter results and upped its earnings guidance from 45c-60c to 50c-70c and lowered its farmgate milk price range from $8.50-$10.
In a statement, chief executive Miles Hurrell said it was a positive start to the year given the global operating environment; the impact of geopolitical and macroeconomic events continued to be felt, with higher costs at every point in the supply chain, and it was a similar story behind the farm gate with farmers managing significantly higher input costs.
Globally, milk supply from key exporting regions was down over the past 12 months. Production in Europe and Australia continued to be down while supply in the United States showed a slight improvement in recent months. In New Zealand, production was down 2.9% on the same point last season.
A strong performance of the company’s ingredients channel reflected continued favourable margins in its protein portfolio particularly for casein and caseinate products used in medical nutrition.
That was driving the increase in total group normalised EBIT which was up 94% to $368 million. Normalised profit after tax was also up 84% to $214 million and normalised earnings per share were 13c, compared with 7c at the same point last year.
"The sustained strong margins in our protein portfolio give us the confidence to upgrade our earnings guidance, although the wider range reflects the volatility in the market which we expect to continue in the short to medium term. If these conditions continue for a further extended period, it could have an additional positive impact on forecast earnings," Mr Hurrell said.
Overall prices lifted 0.6% in this week’s Global Dairy Trade auction while key whole milk powder prices were up 0.1%.
Overall and WMP prices remained down 19% and 20% respectively on the same time a year ago, Westpac senior agri economist Nathan Penny said in a note.
The result was consistent with the bank’s 2022-23 milk price forecast of $8.75. Looking to 2023-24, it had expected the NZD/USD to rise this year and into next.
