The retreat of dairy giant Fonterra back to its New Zealand base continues as it also revealed a solid set of results for the six months to January 31.
A feature of the results was a resumption in dividend payments to shareholders.
The retreat came with a touch of irony – results in the January half from its China business rose sharply – but that was on a different basis, one more linked to exports out of New Zealand.
Fonterra has lost hundreds of millions of dollars in China through poor results, losses and write downs and decided two years ago to return its focus to NZ. Part of that was a review of its assets both in NZ and offshore.
As part of this continuous review, the company revealed Wednesday that it is selling its joint venture farms in China – as well as its stake in formula maker Beingmate – in favour of its domestic operations.
Fonterra’s interest in Beingmate, which was down to 3.94% at the end of January, is now further cut to 2.82%.
The company said it will continue to sell down its remaining shareholding and expects to have fully exited this investment before the end of this financial year in July.
“As shown through our results today, Greater China continues to be one of our most important strategic markets,” CEO Miles Hurrell said in the results statement.
“We remain committed to growing the value of our Greater China business, which we’ll do by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and partnering with local Chinese companies to do so.”
The focus on its core NZ operations paid off in the six months to the end of January with a 43% jump in adjusted first-half profit, on the back of rising global dairy prices and solid demand from China.
The company did however warn that rising raw milk prices will start pressuring margins (though global prices dipped 3.8% at this week’s auction after the huge 15% surge two weeks earlier).
Fonterra’s normalised profit after tax rose to $NZ418 million ($A388 million) for the six months, with earnings before interest and tax from Greater China up 38%.
Fonterra said revenue from continuing operations fell 5% to $NZ9.6 billion, while profit from continuing operations fell 44% $NZ339 million.
Statutory profit dropped 22% to $393 million.
Earnings dropped on a comparative basis because the previous half saw big profits from the sale of its half share in pharmaceutical supplier DFE Pharma and nutrition business Foodspring.
The sharp rise in the adjusted result (excluding last year’s asset sale profits) was a better indication of the company’s performance in the first half of 2020-21.
The company returned to paying dividends with an interim dividend of 5 NZ cents a share and reiterated its full-year earnings forecasts.
Securities in the listed trust rose 1% to $A4.70.
