Coronavirus affecting Fonterra operations

By Jim Cornall

- Last updated on GMT

Fonterra's Danfield plant.
Fonterra's Danfield plant.

Related tags coronavirus COVID-19 Fonterra

Fonterra Co-operative has reaffirmed its forecast Farmgate Milk Price range at NZ$7.00-7.60 (US$4.43-4.81) per kgMS and its forecast full-year underlying earnings guidance of 15-25 cents (US 9-16 cents) per share. It has also revised its forecast milk collections for the 2020 season down from 1.53bn kgMS to 1.515bn kgMS.

Fonterra CEO Miles Hurrell says the cooperative is maintaining its underlying earnings guidance of 15-25 cents per share despite current market conditions as a result of coronavirus.

“The momentum we saw in the first three months of the financial year has continued, and as we approach the interim results our underlying earnings are tracking well. However, given the potential significant risks that could arise from coronavirus in the second half, we are taking a prudent approach and maintaining our full-year forecast earnings range,”​ Hurrell said. 

“The current situation is very fluid and uncertain. However, we have already contracted a high percentage of our 2020 financial year’s milk supply and this is helping us manage the impact of coronavirus.

He added there has been a slow-down in processing of containers at ports and Fonterra is managing the flow of product into China carefully to avoid congestion.

“Currently, our product is continuing to be cleared by customs and quarantine officials. In China, people continue to face movement restrictions due to the outbreak. This means many restaurants and food outlets are closed, which is having a major impact on the operations of our Foodservice customers. Our sales teams are working with these customers to help them where they can.”

Hurrell said there will be a further update on the impact of coronavirus when interim results are announced on March 18.  

Milk collections are expected to be down because of the weather conditions across several parts of New Zealand, he added.

“We have recently seen a reduction in milk collections and our farmers are facing ongoing challenging weather. We’ll continue to work with them to ensure that if they need extra support that they are able to access it.”

Under the DIRA Industry Restructuring Act (DIRA) Fonterra is required to update its forecast Farmgate Milk Price as soon as practicable after March 1, 2020. The DIRA Milk Price remains unchanged at NZ$7.30 (US$4.62) per kgMS.

Over the course of the 2020 financial year, Fonterra added it expects there to be one-off adjustments as it implements strategy and continues its asset portfolio review.

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