Fonterra has posted a net loss of $605 million for the July year, slightly better than expected, on asset writedowns of $826m, mainly on its offshore businesses.
This follows the previous year’s loss of $196m and has sparked a billion dollars worth of asset sales and a significant change in direction for the dairy giant.
New Zealand’s biggest company is cleaning house after a disastrous financial performance and is expected to cut a swathe of staff at its Auckland head office. The co-op was forced to delay the release of its annual accounts while auditor PwC worked through significant accounting adjustments related to the write-downs.
The Financial Markets Authority has also been in discussions with Fonterra after a formal complaint from a shareholder about its financial accounts from 2015-2018.
The writedowns included a $203m impairment of its China Farms investment and $237m on its New Zealand food service business. The overall figure would have been worse if not for a $100m gain on the disposal of ice cream company Tip Top.
In its release this morning, Fonterra said its normalised earnings before interest and tax was $819 million, down 9 per cent. It confirmed no dividend would be paid for the year to July 31 as it pays down debt, and announced a final farmgate milk Price for the 2018/19 season of $6.35/kg milksolids.
But a major change to the company’s dividend policy and an upbeat future earnings per share target suggest brighter days ahead for its long-suffering farmer-shareholders and listed unit holders.
The five-year plan is to deliver a target of 50c per share, and the dividend payment will from now on be 40-60 per cent of reported net profit after tax, instead of 65-75 per cent, reflecting market criticism that the company doesn’t retain enough earnings.
