Jamie Mackay: The Country host on Fonterra posting an improved financial result

New Zealand's economy has been shrinking, but our largest company has seen profits surge.

Fonterra's announced a 13 percent rise in annual operating profit.

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

The Country's Jamie Mackay explains further.

LISTEN ABOVE

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:01):
The Rural Report on Hither Duper See Allen Drive.

Speaker 2 (00:05):
Jamie mckaye hosted the Country with Me evening. Jamie gooday, Ryan,
great result for Fonterra today.

Speaker 1 (00:12):
Yeah, fantastic result. And I heard you talking to Miles
Hurrel just after five o'clock. I chatted to him on
my show today and yeah, look it's a great result.
Literally every number is good. But I just did a
wee bit of interesting homework around the Fonterra co op
share price. Now, these are the shares that the farmers
have to buy to supply milk to Fonterra. They finished

(00:36):
the day trading at six dollars ten. They were up
ten cents this time. A year ago they were three
dollars seventy five. But if you go back to their
real low point all time low seventeenth of November twenty
twenty three, less than two years ago, they were two
dollars and three cents, meaning in less than two years

(00:56):
the price of Fonterra co op shares have gone up
by three hundred percent, or exactly three times. Interestingly, when
I went back further in time, the high of all
time for Fonterra shares was way back in May twenty
thirteen when they were eight dollars. So I know there's

(01:17):
a big vote coming up on October the thirtieth for
Fonterira Farmer shareholders. They have to make their mind up
whether they take the three point two billion dollars from
the four point two billion they're going to get from
the sale or Fonterra is going to get from the
sale of lock Talis. But I think pretty much it's
a done deal. That's what I'm hearing anyhow, And some

(01:40):
of that money will be used to repay shares. Perhaps
some of them Ryan might have even bought their shares
and May twenty thirteen at eight dollars, so who knows.
But for those who bought them a couple of years
ago November twenty twenty three, they've done very well.

Speaker 2 (01:54):
Indeed, it's interesting reading the results today and kind of
having a harm moment about the fact that profit was
actually down slightly. But then that's because their costs are
up because they're buying the milk, which is obviously at
very high prices.

Speaker 1 (02:08):
Yeah, well, they don't always make more money when the
milk price is up because their ingredient is more. I
think some of that profit story. They're also paying a
week bit more tax, but a number that Miles didn't
mention to you. We've got the milk price at ten
dollars sixteen, we've got the forecast milk price at ten dollars.
But the dividend, Okay, that's the yield they get on

(02:29):
their shares. So you buy a share today, you're going
to on this year's on this year's dividend, get a
fifty seven cent per share dividend fully imputed. That means
it's tax paid. It's the equivalent to about seventy nine cents,
and that's up from about fifty five cents yesterday. So

(02:50):
that is a very good yield on your Fonterra share.
If you're a farmer supplying Fonterra, you and I Ryan,
and you're paid a lot more than I am because
you're a star at z B, we could go onto
the sheer market and buy Fonterra shares and the shareholders
fund today, Ryan, we should have bought him yesterday. They

(03:10):
went from seven to forty five up to seven ninety,
up forty five cents, an increase on six percent. So
the market obviously like the Fonterra results today.

Speaker 2 (03:20):
Absolutely what's not to like? Hey, what's going on? Strong
wool actually worth something all of a sudden.

Speaker 1 (03:27):
Yeah, suck, horror, Look this is they Look. The arable
farmers are having a wee bit a tough time, and
some of the horticulture farmers, like the avocado growers, having
a bit of a battle as well in some cases.
But generally across the board, things are really good. Red
meat's good, dairries really good, Kiwi fruit's good, Apples are good.

(03:50):
Strong wool has been, you know, has been the naughty
child if you want of primary sector returns. It's been
worth literally nothing. It's cost you more to share your
sheep than you get for your wall check. But today
at the South Island sale, the strong wall indicator was
up forty six cents. They had a ninety eight percent

(04:13):
clearance And some of the commentary was interesting from a
guy by the name of Dave Burrett who's the South
Island auction manager for PGG Rights, and he said significant
global shortages of all wall types has prompted levels of
demand at the christ Church Wall Exchange not seen in
a generation. Bidding at times was extreme, with buyers having

(04:35):
to fill immediate orders into China. A major Australian based
wall exporting company dominated the floor for most of the
fine wall, which has been going okay. It's been the
strong crossbed wall that's been the issue. So happy days
for farming today.

Speaker 2 (04:49):
Ryan, absolutely, although it looks can be deceiving parts of
the country dealing with the green drought.

Speaker 1 (04:56):
Well that's the beauty of being a farmer. You can't
control the weather, but you can't control commodity prices, you
can't control exchange rates. They're all out of your control.
But yeah, look it's been a bit of a tough
September for many. It's been cold and wet down south
where I am on the east coast of both islands,

(05:17):
like almost from Dunedin north it's getting quite dry. Areas
like one or two Taranaki especially one or two are
getting very dry. And it's also been cold, I mean,
hit by a lot of cold Southwesterlys. So what they're
kind of having in some places, especially in the North Island,
is a bit of a green drought. Other parts of
the country, the further north you go, have had more rain.

(05:39):
But I just think that's farming. You just got to
take what the weather gods give.

Speaker 2 (05:43):
You absolutely and hope for the best. Jamie, thank you.
Jamie mckaye hosted the Country with Us. For more from
Heather Duplessy Allen Drive. Listen live to news talks. It'd
be from four pm weekdays, or follow the podcast on
iHeartRadio