Fonterra Co-operative Group Ltd (ASX:FSF) Reports Q1 Progress
Strategic Direction and Investments
Fonterra Co-operative Group Ltd has shown significant progress in its strategic direction during the first quarter of FY25. CEO Miles Hurrell announced a focus on high-performing Ingredients and Foodservice sectors to enhance returns for shareholders. The company is investing approximately $75 million to expand production capacity for protein ingredients at its Studholme site, while a $150 million investment is targeted at a new UHT cream plant in Edendale, creating 70 jobs in Southland.
Additionally, Fonterra is strengthening its supply chain by allocating $150 million for a new cool store capable of holding 26,000 tonnes of cheese at the Whareroa site. Hurrell remarked, “These strategic investments underpin our future growth, and I’m pleased our balance sheet strength is enabling us to invest in our business.”
Financial Performance
Fonterra reported a Q1 profit after tax of $263 million, equivalent to earnings per share of 16 cents. This reflects a decline from the previous year due to higher milk costs and lower sales volumes. Although gross margins were impacted, improved product allocation within Foodservice and Consumer channels helped mitigate some effects.
The company’s milk collections have increased, leading to a revised full-year forecast of 1,498 million kgMS, a 1.8% rise from last year. The forecast for the Farmgate Milk Price stands at $9.50 – $10.50 per kgMS, supported by strong demand from key markets.
Hurrell added, “While these factors have impacted our gross margins, this has been partially offset by improved product mix.”
Future Outlook
Fonterra is pursuing divestment of its global Consumer business and integrated operations in Oceania and Sri Lanka. The company is also on track with its sustainability targets, including a notable reduction in coal usage for fuel. The outlook for FY25 remains stable, with an earnings guidance of 40-60 cents per share and ongoing investments in IT and digital transformation initiatives.
Motley Fool contributor Abbie Stokes has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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