A record shattering year for dairy industry

The Fonterra report for 2010/11 financial year showed 13% lift in after-tax profit to $771 million. bumper year for dairy exports and strong contributions from overseas businesses have boosted Fonterra to record results for the 2011 financial year, it said.

This translated into record payout (before retentions) of $8.25, comprising farmgate milk price of $7.60 per kilogram of milksolids for the 2011 milk season and distributable profit of 65 cents per share for the 2011 financial year.

The distribution of milk payments and dividends adds up to $10.6 billion inflow into the economy – $2.4 billion more than in 2010 and $1.5 billion more than Fonterra’s previous best year in 2008.

Chairman Sir Henry van der Heyden referred to report by the New Zealand Institute of Economic Research last December that found the benefits of higher Fonterra payout extend well beyond farmers. That’s because they spend around 50 cents out of every dollar earned on locally produced goods and services, although post GFC there has been much greater focus on paying down farm debt.

Fonterra’s revenue increased 19% to $19.9 billion, new record. The cooperative collected record 1,346 million kgMS of raw milk in the 2011 season, 5 per cent higher than the prior season. Dairy exports for the year totalled 2.1 million tonnes, another record.

The results reflect an improved performance by Fonterra’s ingredients businesses that export to more than 100 markets as well as by overseas consumer businesses, especially across Asia and the Middle East, although consumer business profits in NZ and Australia were down in tough market environment.

Statistics NZ June-quarter gross domestic product figures made for more sober reading and were well below what the market was expecting. GDP growth for the June quarter edged up microscopic 0.1%, after lifting surprising 0.9% in the March quarter, although this was the third consecutive quarter of growth after 0.1% decline in the September 2010 quarter. Economic activity for the June year was up 1.5%.

The small increase in GDP growth figures in the June quarter was due to 0.5 percent rise in the services industries and 1.5 percent increase in the primary industries, driven largely by the strength of the dairy sector. However, activity in the goods-producing industries fell 1.0 percent, partly offsetting those increases.

The main movements by industry were:
• Finance, insurance, and business services (up 1.5 percent) – the largest increase since 1.6 percent increase in the March 2005 quarter.
• Agriculture (up 4.3 percent) – increases in dairy and wool were the largest contributors to the rise.
• Construction (down 4.3 percent) – the second consecutive large fall in construction activity following 4.4 percent decrease in the March 2011 quarter.
• Fishing, forestry, and mining (down 3.8 percent) – mining was down 5.4 percent due to falling extraction.
• Manufacturing (down 0.1 percent) – following strong growth in the December 2010 and March 2011 quarters.

The decline in construction activity was driven by falls in construction trade services and residential building activity. Those declines were partly offset by rise in non-building construction activity, such as roads and bridges.


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