Fonterra's Strategy Of Adding Value Paying Off

Fonterra’s Strategy Of Adding Value Paying Off

Fonterra’s strategy of adding value appears to be paying off, with revenue from the first quarter of the 2017 financial year up 5.9 per cent compared to last year’s first quarter.

Revenue to date for the financial year is $3.8 billion, compared to $17.2b for the whole of last year.

Chief executive Theo Spierings told the co-operative’s AGM the volume from its consumer and foodservice category – from where it gains the most value – had risen in volume by 11 per cent and the gross margin was up 31 per cent, compared to 28 per cent.

By contrast, while ingredients volume had increased by 2 per cent, the gross margin had fallen by 12 per cent. Commodities such as whole milk powder and skim milk powder are described as ingredients.

Chairman John Wilson said the three priorities for the year were a commitment to sustainable returns, greater momentum in the strategy to support higher returns and expansion of Farm Source support to farmers.

Farm Source is Fonterra’s business platform for farmers, with 70 stores nationwide. Last year it delivered about $30 million in savings to farmers.

Wilson said in the past year Chinese demand for dairy products from all suppliers worldwide had risen 26 per cent, and in the last three months alone by 12 per cent.

The rest of Asia was also a growth market (up 5 per cent over 12 months), as was Latin America (up 13 per cent). The Middle East and Africa were down 6 per cent over the same period.

Spierings referred to the productivity and environmental challenge facing dairy farming.  Productivity had increased by 8 per cent over the last 12 months, while greenhouse gas emissions were down 3.1 per cent and $20m had been spent on community partnerships.

Fonterra farmers had spent $1b on environmental initiatives on their properties.

By: Gerard Hutching

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