Fonterra Co-operative Group (FCG) H2 2024 earnings summary

Executive summary

• Reported profit after tax of NZ$1,168 million for FY24, with earnings at the top end of the forecast range, though EBIT from continuing operations was NZ$1,560 million, down from NZ$1,755 million year-over-year.

• Delivered a total dividend of 55 cents per share, including a 15 cent special dividend, the second largest since formation.

• Maintained positive momentum from FY23, with strong returns to farmer shareholders and unit holders.

• Consumer and Foodservice margins were pressured by rising milk costs in Q4 but are expected to recover as price increases are passed through.

• Growth projects and capital investments are value accretive, with strict hurdle rates for approval.

Financial highlights

• EBIT from continuing operations reached NZ$1,560 million, remaining well above previous years but down from FY23.

• Consumer segment showed one of its strongest performances in recent years, with Foodservice and Consumer EBIT improving and offsetting lower Ingredients earnings.

• Net debt reduced by $600 million to $2.6 billion, with a gearing ratio of 24.0%, down from 28.8%.

• Group profit after tax from continuing operations was $1,168m, with total group profit after tax at $1,128m.

• Special dividend highlighted, with balance sheet gearing well below previous expectations.

Outlook and guidance

• Expectation of stable to slightly growing earnings in Foodservice and Consumer for FY 2025 as pricing adjustments take effect.

• FY25 forecast Farmgate Milk Price is $8.25–$9.75 per kgMS, with forecast earnings of 40–60 cents per share.

• IT and digital transformation spend will peak in FY 2025, with efficiency gains anticipated.

• Effective tax rate projected around 25%, with dividends expected to be 100% imputed.

• No specific EBIT guidance for in-scope businesses, but positive trajectory expected to continue.