Fonterra reports 18% rise in half-year profit

New Zealand’s Fonterra has announced an increase in net earnings of 18% in the first six months of 2012 to NZ$346m ($283.13m), due to higher volumes and a strong performance of its standard and premium ingredients businesses.

The multinational dairy co-operative reported a revenue growth of 7% to NZ$10bn ($8.18bn) because of higher sales prices and sales volume for the half year to 31 January 2012.

The company’s sales volume went up by 51%, following increased global demand for dairy ingredients and branded consumer products.

Fonterra chairman Sir Henry van der Heyden said that good spring and early summer growing conditions across most of New Zealand, led to strong growth in dairy production and record volumes.

"Fonterra’s milk collections for the season to date were up 10% on the same period in 2011," Heyden said.

The standard and premium ingredients segment, Fonterra’s largest business, posted a 10% increase in revenues to NZ$8bn ($6.54bn), while normalised earnings jumped 44% to NZ$273m ($223.40m). According to Fonterra, this can be attributed to a 7% growth in sales volume and increase in average prices across all dairy categories.

The performance of the consumer business was mixed, with a strong New Zealand dollar affecting the co-operative’s operations in Asia, Africa, the Middle East, and Latin America.

Fonterra’s revenue in Australia and New Zealand decreased by 4% to NZ$2bn ($1.63bn) due to challenging retail environment, while normalised earnings declined 19% to NZ$124m ($101.47m).

Asia, Africa and the Middle East saw a strong revenue growth and went up 7% to NZ$947m ($774.94m) due to steady consumer demand and higher sales volume, while normalised earnings jumped to 44% to NZ$84m ($68.73m). Revenue in Latin America fell by 5% to NZ$385m ($315.05m), and normalised earnings decreased 3% to NZ$62m ($50.73m).

Fonterra, with a share of 40% in the global dairy market, also announced plans to increase investment in dairy farms and facilities in China and other emerging markets.

The co-operative forecast that the global demand for milk is expected to grow by more than 100 billion litres by 2020, led by increased demand in China, India and the Middle East-Africa region.