Peter McBride: Fonterra Chair on the company's net profit rising by 13%

Our largest company has been seeing profits surge, despite a period of contraction in the economy as a whole. 

Fonterra's confirmed a 13% rise in annual operating profit. 

Its final farmgate milk payout to farmers has reached a new record high of $10.16 and its cash return to shareholders is up 30.6%. 

Fonterra Chair Peter McBride told Mike Hosking we need dairy to do well for the country to do well. 

He says dairy is a critical part of the New Zealand economy, and the Government can't grow the economy without growing dairy. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
I mean, apart from the Greens, it seems we're all
celebrating the Fonterra result net profit a bit over a
billion dollars sixteen billion in cash returns to the farm's
final farm gate ten dollars sixteen forecast looks good as well.
Peede McBride is the chairman of Fontira and as well
as Peter good morning, Mike very Well. Indeed, Wayne Langford
of fed Farmer says this is the new normal. Is
he bullish or right?

Speaker 2 (00:20):
Well? Both? Well, I guess he's an optimist as a
farmers anyway.

Speaker 1 (00:25):
I guess so. But I mean, do you see but
it just keeps on keeping on at ten plus, not
only out of this last season, but forecast for the
next season. When does it end? And if it does end,
how well?

Speaker 2 (00:37):
We don't know when it ends. I guess it's a
function of global supply and demand. But certainly we're doing
our best to maintain these sort of levels.

Speaker 1 (00:45):
What is your sense of the demand side of it?
I mean, does the world will it forever? This whole
middle class. I've got some money, so I want quality
food thing. Will that continue to grow forever or not?

Speaker 2 (00:55):
Yeah? Our perspective of that continues to grow on a
NOTT of two percent, and in particularly in Asia, which
is in our wheelhouse, we're seeing global supply at lucks
of Latin America increasing. The US can turn volume on
quite quickly, but we are seeing downward pressure in Europe.
So you know, molk finds us equilibrium, it finds a home.

(01:17):
But I think overall we're in a pretty good space.

Speaker 1 (01:21):
Your sense of the debt vspin story. A lot of
people text me saying, Oh, it's not that good because
the farm is only going to go to the bank
and repay debt. Is that true?

Speaker 2 (01:29):
No, I think it'll be a danced approach. I think
you know, this year there'll be debt reduction, There'll be
a lot of deferred maintenance, there'll be machinery replacements, there
will be spend in regional economies. I think two years
of this becomes more discretionary, and then the capital they
get back from the consumer divestment process will be more discretionary.

Speaker 1 (01:48):
Gain your sense of the break even point eight dollars
I can't remember the number. The other day, take dollars
sixty something? Is that too much debt? I mean, if
you're needing ten to really get some coin in the
I mean, is there too much debt floating about on.

Speaker 2 (02:02):
The farm, Yeah, Parley, But it's also farmer's cost structures,
and there's a big belcove out there, so you'll find
farmers with costs significantly lower than that, not just debt,
but operating costs. So it's about farm systems that you're approaching.
So the risk here is that you lock yourself into
a high cost struction when it hits south and you're

(02:23):
less stranded.

Speaker 1 (02:24):
Explain to people who aren't on the farm this quality story.
When you're dealing with bulk ingredients, do we sell something
that's New Zealand ink that is high quality or is
milk just milk?

Speaker 2 (02:35):
No, we do sell advanced ingredients, which is one of
our high well it is our highest ending category. So
you think about protein in the shape or our tds
like the fitness folk into or for aged here in
particular for rehabilitation. You know, there's a lot of value
in those high value proteins.

Speaker 1 (02:53):
Good the brand sale that you work at, you still
working on that. I would have thought that's foregone conclusion
by now.

Speaker 2 (02:59):
Now it's still and I know we've got a week
on the road with farmers this week they're going to
have a much more informed conversation. Up until now we're
being limited what we could say about it, or we
could talk about the why divist consumer, But now they've
got a bunch of numbers to look at it more
rational for the decision.

Speaker 1 (03:15):
Okay, and the Greens I noted yesterday were saying what
we really need to do in this country, Peter is
move away from cows. Apart from the Greens. Does anybody
think that?

Speaker 2 (03:26):
No one that I make us thinks that. I think
Dearie is a critical part of the New Zealand economy
as agriculture, and I think if the government wants to
drive the New Zealand economy, they're not going to do
it without growing diary exactly.

Speaker 1 (03:38):
Well, congratulations on the result. We appreciate time. Peter McBride,
who's the v Frontier at chairman.

Speaker 2 (03:43):
For more from the Mic Asking Breakfast, listen live to
news talks.

Speaker 1 (03:46):
It'd be from six am weekdays, or follow the podcast
on iHeartRadio.