Key Facts and Highlights:
- Revenue: Total revenue for FY24 was NZD 22.99 billion, a 12% decrease from the previous year.
- Profit: Net profit from continuing operations was NZD 1.17 billion, representing a 6% drop.
- Dividends: The company declared a total dividend of 55 cents per share, consisting of a 15-cent interim dividend, 25-cent final dividend, and a special dividend of 15 cents.
- Dividend Record and Payment Dates: The record date is 2 October 2024, and the payment date is 11 October 2024.
- EBIT: Earnings before interest and taxes (EBIT) from continuing operations stood at NZD 1.56 billion, slightly down from last year’s figure.
- Return on Capital: Fonterra achieved a return on capital of 11.3%, higher than the five-year average and above its FY24 target.
- Farmgate Milk Price: The final Farmgate Milk Price for the 2023/24 season was NZD 7.83 per kgMS.
- Net Debt: Net debt was reduced by NZD 600 million, bringing the total down to NZD 2.6 billion.
- Special Initiatives: The company is exploring the divestment of its global Consumer business, including Fonterra Oceania and Sri Lanka.
Special Investor Notes:
- Dividends: Investors should note that the company has declared both a final dividend and a special dividend. The total dividend payout of 55 cents is among the highest Fonterra has paid since its inception.
- Balance Sheet Strength: Fonterra’s strong balance sheet and lower debt levels provide flexibility for future investments and resilience against volatility.
- Efficiency Improvements: The company continues to focus on reducing operating costs, achieving a 2% reduction in core operations manufacturing costs per kgMS.
- Strategic Divestments: Fonterra is assessing potential divestments in the Consumer business, which could unlock additional value for shareholders.
- Sustainability Initiatives: Fonterra has committed to a 30% reduction in on-farm emissions by 2030 and is investing in projects related to sustainability, such as decarbonization and wastewater management.
Investor Recommendations:
- For Current Shareholders: Fonterra’s continued focus on profitability, solid dividends, and special payouts make it a solid hold. The company’s strategic divestments may unlock further value, and the reduced debt level provides resilience. Investors holding this stock may consider maintaining their positions to benefit from future capital returns and the company’s sustainable growth focus.
- For Potential Investors: With a strong balance sheet, dividend payouts, and a commitment to growth through strategic divestments and sustainability, Fonterra presents a compelling opportunity for new investors. However, careful attention should be paid to the outcome of the divestment strategies and ongoing market conditions, particularly in the dairy trade.
Special Actions to Improve Profitability:
- Strategic Divestment: Fonterra is exploring divestment options for its global Consumer business, Fonterra Oceania, and Sri Lanka. This move is expected to maximize value for shareholders.
- Investment in Innovation: The company has invested in projects like a high-value protein hub, a new UHT cream plant, and a new cool store to drive future growth.
- Digital Transformation: Significant investments in IT and digital transformation projects are aimed at improving long-term operational efficiency.
Financial Year and Date:
- Financial Year: The report covers the 12 months ending 31 July 2024.
- Report Date: Released on 25 September 2024.
Disclaimer:
This recommendation is based solely on the financial data and performance of Fonterra as reported for FY24. Market conditions and personal investment goals should also be considered before making any investment decisions. Please consult with a financial advisor for tailored investment advice.
