Fonterra Australia suppliers should not be worried about the big loss announced last week by Fonterra’s parent company, a leading dairy industry analyst says.
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Rabobank Australia dairy analyst Michael Harvey said Fonterra Australia itself was performing well and there was still a good chance of price increases for Fonterra suppliers this milk season.
The global Fonterra company, headquartered in New Zealand, last week posted a net loss of $NZ221 million ($203 million) - the first annual loss in its 17-year history.
The loss came after the company wrote down $NZ439 million off a $NZ750 million investment into Chinese food company Beingmate. It also paid out $NZ232 million to French food giant Danone after arbitration over the recall of products in a botulism scare in 2013.
Interim chief executive Miles Hurrell said even without the write-offs, there were still four other areas of difficulty, including overly optimistic market forecasting, high butter prices, increased farmgate milk prices paid to its farmers and increasing expenses.
By Mr Harvey said the impact of the loss was likely to be mainly contained to Fonterra’s New Zealand suppliers who had had taken a price cut from $NZ7 a kilogram milk solids to $6.75 kgms.
Tony Marwood, chairman of Bonlac Milk Supply that represents Fonterra Australia suppliers, said the loss by Fonterra’s parent company would not have any impact on Fonterra’s Australian milk price.
Mr Marwood said Fonterra Australia had made a profit in 2017-2018 and was expected to do the same again this financial year.
He said the loss by the parent company was due to “a couple of major one-offs” events with Beingmate and Danone.
Mr Marwood said the biggest concern for Fonterra Australia suppliers was the impact of high hay, grain and water prices from the drought in much of eastern Australia.
A Fonterra Australia spokesperson said “despite some challenging global results, our Australian business made a good contribution and is generating repeatable returns, enabling us to pay a sustainable milk price to our farmers.
“The Australian farmgate milk price will not be impacted by Fonterra’s full year global results.
“Our three business channels – Consumer, Ingredients and Foodservice – performed well and the underlying health of our business remains strong.”
The spokesperson said its recent investments were about giving the company the right products and markets to get sustainable returns back to farmers.
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