December 3, 2025 • 7 mins
Fonterra’s chief executive announces the Co-operative Group’s FY26 Q1 business update.
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Episode Transcript
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Speaker 1 (00:00):
This morning, Fonterra released Quarterly one or Q one business update.
It was a bit hum rarely, to be perfectly honest,
because Miles Hurrell, chief Executive, all the thunder of this
announcement was stolen last week when you announced the drop
and the forecast milk price to a midpoint of nine
point fifty or am I being a bit unkind?
Speaker 2 (00:21):
Good Jamie, look, And I wouldn't say unkind, but you're right.
We did come out last week with a forecast change
on our milk price and that was a reflection of
you know that the outlook the sentiment obviously turned quite
significantly from where we started the season, and we felt
it was important to come out and talk to our
farmers as soon as we got sites of that. But yeah,
there are two parts of business. Clearly, we've gone after
(00:42):
a strong milk price the best we can in the
global market, but at the same time we then got
to turn and earnings on top of that. So what
we're put out today so that we've got off to
a pretty good start for the quarter.
Speaker 1 (00:53):
Well, since that announcement last week, we've had another negative
down four percent GDT auction. Is that nine fifty under threat?
And I know you won't answer this, but I'm going
to put words into your mouth.
Speaker 3 (01:04):
Yes it is. Well.
Speaker 2 (01:06):
Look, when we came out last week, which was a
week or so ahead of when we expected, we'd planned
today's announcement to talk about milk price as well because
the market.
Speaker 3 (01:15):
Had moved off a little bit.
Speaker 2 (01:17):
But when it came out of that last pulse, we thought, no,
we've got to get ahead of it. The futures were
signaling even further drop, which we saw play out last night.
So we baked in a further drop last night or
the night before last rather and so that's certainly in
our nine fifty, but we obviously got to watch it closely.
There's a lot of milk in the international market. You know,
what we're seen play out here in New Zealand on
(01:38):
the back of these high milk prices relatively good weather
conditions is exactly what we're seen play out in the
northern Hembssy and some of those big producing regions with
the France and Germany and the Netherlands, and of course
in North America. A lot more milk, a lot more cows,
and as a result, you're seen down.
Speaker 3 (01:54):
With pressure on price.
Speaker 2 (01:55):
So not ideal as we sit there from a farmer's perspective,
but you know, still nine to fifty who back through history,
still not too bad.
Speaker 1 (02:01):
Yeah, it's the old supply and demand story economics. One one.
Do you think that farmers might be less tempted now
to poke in supplements because obviously at ten bucks, as
i'd say with my layman's terms, poke it in one end,
it comes out the other. It's just a mathematical equation.
It pays to do it, it may not pay to
do it at nine dollars.
Speaker 3 (02:21):
Yeah.
Speaker 2 (02:22):
Well, well, of course, you know farmers will make their
own calls. But I guess that that also played into
our decision last week to come early on that announcement,
is that you know, farmers will be making decisions every
day now as to what their feed pedents look like
for the first and second quarter next year. And of
course you win to grazing and starts to be thought
about shortly. So all of those things played into it.
Let's get the information as soon as we've got it
out to farmers and they can make the right calls.
(02:44):
As I say, they'll all do their own analysis and
move forward. But there has been a bit more supplementary
feed put in the cows to date, so maybe that'll
turn around, as you say, and then as milk contracts
here in New Zealand and elsewhere in the world will
see that equilibrium come back into play.
Speaker 1 (02:59):
The big number was announced last week. As we said,
from these numbers released today, what are the big ones,
what are the relevant ones, what are the exciting ones?
Speaker 2 (03:08):
Well, of course we've broken into two here. We've got
so what we call continuing operations, which is sort of
the Fontier of the future, if you can call it that,
and then what we call discontinued operations, So that's the
mainland business.
Speaker 3 (03:18):
So we've broken those two out.
Speaker 2 (03:20):
The business of the go forward is pretty much in
line with last year, and the mainland business that's been
sold off, subject to all the regultary pieces that have
got to go through. Of course, that was up slightly.
There was a bit of a tail wind on imagery
revaluation in Australia, so we shouldn't get too excited with that,
but it is pleasing to see that mainland business actually
going forward positively as we get to the final stages
(03:42):
of that sales process, when are the.
Speaker 1 (03:45):
Farmers going to get their two dollars per share capital
repayment in their hot little hands.
Speaker 3 (03:51):
Yeah.
Speaker 2 (03:51):
So you know, we've talked about some of the regulatory
approvals that needed. A big one of course this week
is that Luckily got io approval here in New Zealand.
Speaker 1 (04:00):
That's despite the Deputy Prime Minister, former Deputy Prime Minister,
former MP for Towering or Winston jumping up and down
about foreign ownership.
Speaker 3 (04:08):
Will He did make some comments, that's for sure.
Speaker 2 (04:09):
But anyway, the process has run its course and they've
been given the green light. We've got similar processes to
take place and some of other jurisdictions, and then you've
got the I guess, the IT separation and the physical
office to take place. So all those things are well
in trained. So we found the first half twenty twenty
six is all. It will be completed and then cash
(04:30):
cash pretty quickly thereafter, subject to that final sort of
vote that needs to take place, but that's all just
a formality more or less.
Speaker 1 (04:37):
Yeah, turkeys don't vote for an early Christmas. The farmers
are going to vote this through unanimously, you would think,
or almost so that vote is on the nineteenth of February.
As you said, it's a formality, and I know you're
talking first half of the calendar year. Are we April
or are we June.
Speaker 2 (04:54):
Yeah, we'll look him in the pressures on for everyone
to get this moving. You know, the conversations I've with
lack Police even quite recently, is he he made the
sort of tongue in cheek comment that I spoilt his
summer in Europe by negotiating through through his summer holiday periods.
He he had a joke with men to well, I'll
spoil your summer, so let's let's keep moving on it.
Speaker 3 (05:12):
So he wants the deal to go through. We want
the deal to go through.
Speaker 2 (05:15):
So we just put a stake in the ground and
said first half because there is quite a lot of
complexity to undertake, but we'll work hard at that and
see you see how that plays out.
Speaker 1 (05:24):
One other thing to come out of this Q one
business update was the amount of investment, the money you're
spending around the country on your sites.
Speaker 2 (05:33):
Yeah, and look we came out I think it was
at the year end results and said by if twenty
eight we're going to be back to the same level
of earnings without the mainland business. And so that's you know,
that's quite a bold statement for us to make. But
a lot of that comes back to you know, growing,
growing our businesses we've got today. So you know, we've
got to invest in new uht in advanced protein products
(05:56):
in this buttafactory. So we've got to invest in those
to to be able to grow. Can't just become static.
So that's what that's investment's all about. We're excited about
that because there's say, the stake in the ground for
us is get back to those same earning levels within
three years of the investment, So that's what we're going
for and feeling feeling good about that.
Speaker 1 (06:13):
Have you got a feeling that we're that that does
gdt auction thing? Hate to come back to the milk price,
but it's important. Where's the floor?
Speaker 2 (06:22):
Yeah, that's that's the interesting question, right is you know,
having spent a lot of my career in the markets,
you know, buyer buyers are an interesting, interesting bunch, and
of course they're all trying to pick pick the bottom.
The inventories in it and most of our buyers are
globally are actually relatively low, which is a good thing.
And what that suggests to me is that they're all
sitting there waiting for the market to bottom out. They'll
(06:43):
all then jump in and refill their supply chains. But
you know who knows when that will be.
Speaker 3 (06:48):
But you can't.
Speaker 2 (06:49):
You can't if you've got if you've got a strong
brand and one of your key markets that you know,
the worst thing a procurement manager needs to do is
to run new supply chain empty and not have product
on the shelf. So that's the trade off of the
balance that they'll be watching. But we need to do
watch it closely. There is a lot of milkers, i say,
floating around the Norman hemisphere in particular, so we need
to see that play its way through. We'll watch closely
(07:10):
and our first people to hear about will be our
farmers if we need to make any changes.
Speaker 1 (07:14):
Miles Harrel, Chief executive of Fonterra, thank you very much
for telling us all about that Q one business update.
Speaker 3 (07:20):
Always good to chat. Good on you. Thanks Jami,
This morning, Fonterra released Quarterly one or Q one business update.
It was a bit hum rarely, to be perfectly honest,
because Miles Hurrell, chief Executive, all the thunder of this
announcement was stolen last week when you announced the drop
and the forecast milk price to a midpoint of nine
point fifty or am I being a bit unkind?
Speaker 2 (00:21):
Good Jamie, look, And I wouldn't say unkind, but you're right.
We did come out last week with a forecast change
on our milk price and that was a reflection of
you know that the outlook the sentiment obviously turned quite
significantly from where we started the season, and we felt
it was important to come out and talk to our
farmers as soon as we got sites of that. But yeah,
there are two parts of business. Clearly, we've gone after
(00:42):
a strong milk price the best we can in the
global market, but at the same time we then got
to turn and earnings on top of that. So what
we're put out today so that we've got off to
a pretty good start for the quarter.
Speaker 1 (00:53):
Well, since that announcement last week, we've had another negative
down four percent GDT auction. Is that nine fifty under threat?
And I know you won't answer this, but I'm going
to put words into your mouth.
Speaker 3 (01:04):
Yes it is. Well.
Speaker 2 (01:06):
Look, when we came out last week, which was a
week or so ahead of when we expected, we'd planned
today's announcement to talk about milk price as well because
the market.
Speaker 3 (01:15):
Had moved off a little bit.
Speaker 2 (01:17):
But when it came out of that last pulse, we thought, no,
we've got to get ahead of it. The futures were
signaling even further drop, which we saw play out last night.
So we baked in a further drop last night or
the night before last rather and so that's certainly in
our nine fifty, but we obviously got to watch it closely.
There's a lot of milk in the international market. You know,
what we're seen play out here in New Zealand on
(01:38):
the back of these high milk prices relatively good weather
conditions is exactly what we're seen play out in the
northern Hembssy and some of those big producing regions with
the France and Germany and the Netherlands, and of course
in North America. A lot more milk, a lot more cows,
and as a result, you're seen down.
Speaker 3 (01:54):
With pressure on price.
Speaker 2 (01:55):
So not ideal as we sit there from a farmer's perspective,
but you know, still nine to fifty who back through history,
still not too bad.
Speaker 1 (02:01):
Yeah, it's the old supply and demand story economics. One one.
Do you think that farmers might be less tempted now
to poke in supplements because obviously at ten bucks, as
i'd say with my layman's terms, poke it in one end,
it comes out the other. It's just a mathematical equation.
It pays to do it, it may not pay to
do it at nine dollars.
Speaker 3 (02:21):
Yeah.
Speaker 2 (02:22):
Well, well, of course, you know farmers will make their
own calls. But I guess that that also played into
our decision last week to come early on that announcement,
is that you know, farmers will be making decisions every
day now as to what their feed pedents look like
for the first and second quarter next year. And of
course you win to grazing and starts to be thought
about shortly. So all of those things played into it.
Let's get the information as soon as we've got it
out to farmers and they can make the right calls.
(02:44):
As I say, they'll all do their own analysis and
move forward. But there has been a bit more supplementary
feed put in the cows to date, so maybe that'll
turn around, as you say, and then as milk contracts
here in New Zealand and elsewhere in the world will
see that equilibrium come back into play.
Speaker 1 (02:59):
The big number was announced last week. As we said,
from these numbers released today, what are the big ones,
what are the relevant ones, what are the exciting ones?
Speaker 2 (03:08):
Well, of course we've broken into two here. We've got
so what we call continuing operations, which is sort of
the Fontier of the future, if you can call it that,
and then what we call discontinued operations, So that's the
mainland business.
Speaker 3 (03:18):
So we've broken those two out.
Speaker 2 (03:20):
The business of the go forward is pretty much in
line with last year, and the mainland business that's been
sold off, subject to all the regultary pieces that have
got to go through. Of course, that was up slightly.
There was a bit of a tail wind on imagery
revaluation in Australia, so we shouldn't get too excited with that,
but it is pleasing to see that mainland business actually
going forward positively as we get to the final stages
(03:42):
of that sales process, when are the.
Speaker 1 (03:45):
Farmers going to get their two dollars per share capital
repayment in their hot little hands.
Speaker 3 (03:51):
Yeah.
Speaker 2 (03:51):
So you know, we've talked about some of the regulatory
approvals that needed. A big one of course this week
is that Luckily got io approval here in New Zealand.
Speaker 1 (04:00):
That's despite the Deputy Prime Minister, former Deputy Prime Minister,
former MP for Towering or Winston jumping up and down
about foreign ownership.
Speaker 3 (04:08):
Will He did make some comments, that's for sure.
Speaker 2 (04:09):
But anyway, the process has run its course and they've
been given the green light. We've got similar processes to
take place and some of other jurisdictions, and then you've
got the I guess, the IT separation and the physical
office to take place. So all those things are well
in trained. So we found the first half twenty twenty
six is all. It will be completed and then cash
(04:30):
cash pretty quickly thereafter, subject to that final sort of
vote that needs to take place, but that's all just
a formality more or less.
Speaker 1 (04:37):
Yeah, turkeys don't vote for an early Christmas. The farmers
are going to vote this through unanimously, you would think,
or almost so that vote is on the nineteenth of February.
As you said, it's a formality, and I know you're
talking first half of the calendar year. Are we April
or are we June.
Speaker 2 (04:54):
Yeah, we'll look him in the pressures on for everyone
to get this moving. You know, the conversations I've with
lack Police even quite recently, is he he made the
sort of tongue in cheek comment that I spoilt his
summer in Europe by negotiating through through his summer holiday periods.
He he had a joke with men to well, I'll
spoil your summer, so let's let's keep moving on it.
Speaker 3 (05:12):
So he wants the deal to go through. We want
the deal to go through.
Speaker 2 (05:15):
So we just put a stake in the ground and
said first half because there is quite a lot of
complexity to undertake, but we'll work hard at that and
see you see how that plays out.
Speaker 1 (05:24):
One other thing to come out of this Q one
business update was the amount of investment, the money you're
spending around the country on your sites.
Speaker 2 (05:33):
Yeah, and look we came out I think it was
at the year end results and said by if twenty
eight we're going to be back to the same level
of earnings without the mainland business. And so that's you know,
that's quite a bold statement for us to make. But
a lot of that comes back to you know, growing,
growing our businesses we've got today. So you know, we've
got to invest in new uht in advanced protein products
(05:56):
in this buttafactory. So we've got to invest in those
to to be able to grow. Can't just become static.
So that's what that's investment's all about. We're excited about
that because there's say, the stake in the ground for
us is get back to those same earning levels within
three years of the investment, So that's what we're going
for and feeling feeling good about that.
Speaker 1 (06:13):
Have you got a feeling that we're that that does
gdt auction thing? Hate to come back to the milk price,
but it's important. Where's the floor?
Speaker 2 (06:22):
Yeah, that's that's the interesting question, right is you know,
having spent a lot of my career in the markets,
you know, buyer buyers are an interesting, interesting bunch, and
of course they're all trying to pick pick the bottom.
The inventories in it and most of our buyers are
globally are actually relatively low, which is a good thing.
And what that suggests to me is that they're all
sitting there waiting for the market to bottom out. They'll
(06:43):
all then jump in and refill their supply chains. But
you know who knows when that will be.
Speaker 3 (06:48):
But you can't.
Speaker 2 (06:49):
You can't if you've got if you've got a strong
brand and one of your key markets that you know,
the worst thing a procurement manager needs to do is
to run new supply chain empty and not have product
on the shelf. So that's the trade off of the
balance that they'll be watching. But we need to do
watch it closely. There is a lot of milkers, i say,
floating around the Norman hemisphere in particular, so we need
to see that play its way through. We'll watch closely
(07:10):
and our first people to hear about will be our
farmers if we need to make any changes.
Speaker 1 (07:14):
Miles Harrel, Chief executive of Fonterra, thank you very much
for telling us all about that Q one business update.
Speaker 3 (07:20):
Always good to chat. Good on you. Thanks Jami,
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