1 00:00:00,280 --> 00:00:02,520 Speaker 1: The information provided in this program is of a general 2 00:00:02,600 --> 00:00:05,320 Speaker 1: nature and is not intended to be personalized financial advice. 3 00:00:05,400 --> 00:00:07,760 Speaker 1: We encourage you to seek appropriate advice from a qualified 4 00:00:07,760 --> 00:00:12,240 Speaker 1: professional to suit your individual circumstances. Fonterra is paying its 5 00:00:12,240 --> 00:00:15,920 Speaker 1: second largest dividend in its history. How the dairy Cooperative's 6 00:00:15,960 --> 00:00:19,760 Speaker 1: finances have changed and how its future will coop And 7 00:00:19,800 --> 00:00:20,560 Speaker 1: I think you and I. 8 00:00:20,520 --> 00:00:22,560 Speaker 2: Tooked about a year ago around what was the growth. 9 00:00:22,640 --> 00:00:24,919 Speaker 2: Can so started to see that play out and those 10 00:00:24,920 --> 00:00:26,840 Speaker 2: things alive and give us a confidence that we consu 11 00:00:26,920 --> 00:00:27,760 Speaker 2: to pay strong evenments. 12 00:00:36,280 --> 00:00:40,280 Speaker 1: Our export let economy is built on dairy, making Fonterra 13 00:00:40,440 --> 00:00:43,559 Speaker 1: one of our more important assets. It just made an 14 00:00:43,640 --> 00:00:47,360 Speaker 1: annual net profit after tax of one point one billion dollars, 15 00:00:47,720 --> 00:00:51,479 Speaker 1: down from one point six billion last financial year. It 16 00:00:51,520 --> 00:00:54,520 Speaker 1: also announced a fifty five cents per year dividend for 17 00:00:54,560 --> 00:00:58,640 Speaker 1: the year, including a fifteen cent special dividend, making the 18 00:00:58,680 --> 00:01:02,680 Speaker 1: total the second larger in its history. The cooperative, which 19 00:01:02,720 --> 00:01:05,800 Speaker 1: is owned by its dairy farmer suppliers, has come a 20 00:01:05,840 --> 00:01:09,720 Speaker 1: long way since its reset started in twenty eighteen. It's 21 00:01:09,760 --> 00:01:12,800 Speaker 1: sold out of joint ventures around the world and Brazil, 22 00:01:13,040 --> 00:01:17,280 Speaker 1: Chile and China, including its loss making China Farm's business. 23 00:01:17,760 --> 00:01:20,480 Speaker 1: It even flicked its Tip Top ice cream business in 24 00:01:20,520 --> 00:01:30,360 Speaker 1: twenty nineteen. It's now consulting on another major asset sale. 25 00:01:30,680 --> 00:01:35,640 Speaker 1: It's New Zealand Consumer division that comprises its iconic brands Anchor, 26 00:01:35,800 --> 00:01:40,240 Speaker 1: Mainland Carpety and Leanen and Mump Powder, Western Star Butter 27 00:01:40,600 --> 00:01:45,040 Speaker 1: and Perfect Italiano Cheese. It'll need farmer shareholders to approve 28 00:01:45,160 --> 00:01:47,600 Speaker 1: any sale, and they may want to see some of 29 00:01:47,640 --> 00:01:51,400 Speaker 1: the price fetched return to them, given they've been struggling 30 00:01:51,400 --> 00:01:54,640 Speaker 1: with on farm inflation in recent years, with costs for 31 00:01:54,720 --> 00:01:57,440 Speaker 1: fertilizer increasing up to thirty percent. 32 00:01:58,040 --> 00:02:02,800 Speaker 3: It particular labor, all those farming puts, you know, be 33 00:02:03,400 --> 00:02:06,360 Speaker 3: pretty much out of control on the last threet. They're 34 00:02:06,400 --> 00:02:10,120 Speaker 3: starting to abate now, so farm imagines are starting to improve. 35 00:02:10,160 --> 00:02:14,000 Speaker 1: AG dairy farmers received seven dollars eighty three per kilo 36 00:02:14,080 --> 00:02:17,760 Speaker 1: of milk solids last season, barely enough to break even, 37 00:02:18,240 --> 00:02:21,480 Speaker 1: but Fonterra expects to pay a higher price this season, 38 00:02:21,880 --> 00:02:23,760 Speaker 1: with a midpoint of nine dollars. 39 00:02:24,080 --> 00:02:28,280 Speaker 3: Yeah, it helps, but nine dollars isn't the old nine doors. 40 00:02:28,320 --> 00:02:33,600 Speaker 3: So we're talking about a nominal nine dollars, nine dollars 41 00:02:33,639 --> 00:02:35,960 Speaker 3: six or seven wals ago with a lot more than 42 00:02:36,080 --> 00:02:36,720 Speaker 3: it is today. 43 00:02:37,040 --> 00:02:40,280 Speaker 1: It reflects the co op strategic focus on New Zealand 44 00:02:40,320 --> 00:02:43,480 Speaker 1: milk as it continues to get its balance sheet and order. 45 00:02:44,040 --> 00:02:46,079 Speaker 1: That's what I talk to its leaders about at its 46 00:02:46,080 --> 00:02:50,079 Speaker 1: financial result press conference in Auckland this week, wanting Peter 47 00:02:50,360 --> 00:02:52,720 Speaker 1: Miles and Andrew Nice and Andrew, have you met you before? 48 00:02:52,880 --> 00:02:56,440 Speaker 1: Thank you so much for having us first Miles the 49 00:02:56,520 --> 00:02:59,880 Speaker 1: second largest ever dividend in the history of this co op. 50 00:03:00,240 --> 00:03:03,240 Speaker 1: What about the financial performance in the past twelve months, 51 00:03:03,280 --> 00:03:05,960 Speaker 1: but also going forward gives you confidence that you can 52 00:03:05,960 --> 00:03:06,680 Speaker 1: pay that amount? 53 00:03:07,919 --> 00:03:10,079 Speaker 2: Yeah, well, I mean we've been on a journey for 54 00:03:10,240 --> 00:03:11,760 Speaker 2: sort of the last four or five years and getting 55 00:03:11,760 --> 00:03:13,480 Speaker 2: our business into good shape. And you've seen that in 56 00:03:13,480 --> 00:03:16,280 Speaker 2: the slides here with regards to a balance sheet. So 57 00:03:16,320 --> 00:03:18,600 Speaker 2: WI you get you balance, you under control, gives you 58 00:03:18,600 --> 00:03:21,120 Speaker 2: the optionality, it gives you the flexibility. And so you've 59 00:03:21,120 --> 00:03:23,799 Speaker 2: seen the investments we've made more recently. And so I 60 00:03:23,840 --> 00:03:26,120 Speaker 2: have our protein products and so are UHT. And so 61 00:03:26,840 --> 00:03:29,800 Speaker 2: that's about That's about growing the organization as a whole. 62 00:03:29,880 --> 00:03:31,480 Speaker 2: And I think you and I talk about that a 63 00:03:31,560 --> 00:03:33,320 Speaker 2: year ago around what is that growth plan? So you're 64 00:03:33,320 --> 00:03:35,440 Speaker 2: starting to see that play out and those things a 65 00:03:35,520 --> 00:03:37,200 Speaker 2: line and give us the confidence that will continue to 66 00:03:37,200 --> 00:03:38,400 Speaker 2: pay strongm. 67 00:03:38,240 --> 00:03:40,080 Speaker 1: On balance sheet. Andrew, I'd love to ask you about 68 00:03:40,080 --> 00:03:42,280 Speaker 1: that net debt figure. I remember sitting in this room 69 00:03:42,640 --> 00:03:44,800 Speaker 1: a few years ago and that gearing ratio was at 70 00:03:44,800 --> 00:03:47,520 Speaker 1: forty eight percent. Now it's down to twenty four percent. 71 00:03:48,160 --> 00:03:50,680 Speaker 1: Talk to us about the decisions that have had to 72 00:03:50,720 --> 00:03:53,280 Speaker 1: be have had to have been made, and the focus 73 00:03:53,520 --> 00:03:55,040 Speaker 1: and this co opt to get it down to the 74 00:03:55,120 --> 00:03:56,880 Speaker 1: level where it's at now. And how do you feel 75 00:03:56,880 --> 00:03:57,720 Speaker 1: about where it is now? 76 00:03:58,200 --> 00:04:00,000 Speaker 2: So I actually feel really comfortable with where we are. 77 00:04:00,000 --> 00:04:01,920 Speaker 2: I know, if you look at our guardrails we've been 78 00:04:02,080 --> 00:04:04,120 Speaker 2: aiming to get down to this sort of level. We're 79 00:04:04,160 --> 00:04:07,360 Speaker 2: probably a little membe, a little lawd where where we 80 00:04:07,360 --> 00:04:10,520 Speaker 2: would adly be. But obviously that you know, we've had 81 00:04:10,560 --> 00:04:12,720 Speaker 2: a really good selection of innings that's enabled us to 82 00:04:12,760 --> 00:04:15,040 Speaker 2: get ourselves into really good sheeap and that's what sets 83 00:04:15,120 --> 00:04:16,839 Speaker 2: us up for the future. I think if we look 84 00:04:16,839 --> 00:04:18,359 Speaker 2: out a little bit, you know, we do have some 85 00:04:18,440 --> 00:04:21,240 Speaker 2: larger investments coming up as we continue doing the sustitability 86 00:04:21,279 --> 00:04:24,600 Speaker 2: agenda and the other goals investments. So feeling really comfortable 87 00:04:24,600 --> 00:04:26,240 Speaker 2: that we're in the exact range we need to be 88 00:04:26,600 --> 00:04:28,560 Speaker 2: and we can also stand a little bit of volatility 89 00:04:28,640 --> 00:04:29,159 Speaker 2: in the market. 90 00:04:29,440 --> 00:04:32,520 Speaker 1: Thanks Andrew Miles on consumer I'm sure everyone wants to 91 00:04:32,560 --> 00:04:37,080 Speaker 1: know about this today. Margins there have improved massively. Sales 92 00:04:37,080 --> 00:04:39,640 Speaker 1: were up six percent, made one hundred and ninety nine 93 00:04:39,680 --> 00:04:42,119 Speaker 1: million dollars in earnings in the financial year just ended. 94 00:04:42,279 --> 00:04:43,320 Speaker 1: Why do you want to get rid of it? 95 00:04:43,880 --> 00:04:47,120 Speaker 2: Well, clearly it's tad one of us bitter years across 96 00:04:47,160 --> 00:04:49,520 Speaker 2: the history of the cooperative, which shows that the team 97 00:04:49,520 --> 00:04:53,400 Speaker 2: of focus of delivering our brands are wanted by consumers globally. 98 00:04:54,080 --> 00:04:56,080 Speaker 2: But still we're still not the natural owner of that 99 00:04:56,080 --> 00:04:57,919 Speaker 2: business when you look at the return on capital compared 100 00:04:57,920 --> 00:05:00,520 Speaker 2: to other business units. We believe very radios in our 101 00:05:00,520 --> 00:05:03,440 Speaker 2: food service as it has a better future for this corporative, 102 00:05:04,000 --> 00:05:06,080 Speaker 2: and so we don't shy away from the fact that 103 00:05:06,320 --> 00:05:08,200 Speaker 2: we've had a very strong performance. It's still not at 104 00:05:08,200 --> 00:05:10,200 Speaker 2: the levels that we would like to see over the 105 00:05:10,240 --> 00:05:13,200 Speaker 2: long terminus. A new natural odor is the right place 106 00:05:13,200 --> 00:05:13,520 Speaker 2: for us. 107 00:05:13,680 --> 00:05:15,000 Speaker 1: How much do you think you can fetch for it 108 00:05:15,120 --> 00:05:15,719 Speaker 1: in a price. 109 00:05:15,560 --> 00:05:18,600 Speaker 2: Tamally two too early? Have you got a checkbook? Medicine. 110 00:05:19,000 --> 00:05:21,120 Speaker 1: I don't think I can afford three point five billion dollars, 111 00:05:21,160 --> 00:05:23,320 Speaker 1: but fans for asker, I mean, and as. 112 00:05:23,160 --> 00:05:26,000 Speaker 2: I said, I think in Q three, you know we've 113 00:05:26,000 --> 00:05:28,000 Speaker 2: had had some very good interest in our business. We've 114 00:05:28,000 --> 00:05:30,960 Speaker 2: now apported some advice to help us on the next phase, 115 00:05:31,040 --> 00:05:33,680 Speaker 2: and so we're looking forward to sort again getting that 116 00:05:33,760 --> 00:05:34,719 Speaker 2: kicked off before crystals. 117 00:05:35,480 --> 00:05:38,120 Speaker 1: Simplified strategies are what we're seeing from a lot of 118 00:05:38,120 --> 00:05:40,880 Speaker 1: businesses at the moment. You're seeing us Worth Rhyme and 119 00:05:40,920 --> 00:05:43,839 Speaker 1: healthcare with the warehouse. All of these businesses are getting 120 00:05:43,839 --> 00:05:45,560 Speaker 1: back to their core. But I want to know what 121 00:05:45,640 --> 00:05:48,080 Speaker 1: Fonterra will then look like going forward if it loses 122 00:05:48,120 --> 00:05:50,719 Speaker 1: one of only three divisions that it has left. We've 123 00:05:50,720 --> 00:05:52,839 Speaker 1: seen the Ingredients, which is one of the two that 124 00:05:52,880 --> 00:05:55,839 Speaker 1: you'll be left with after divesting. Consumer hasn't had that 125 00:05:55,880 --> 00:05:59,320 Speaker 1: good of a year. So how diversified and strong will 126 00:05:59,360 --> 00:06:03,080 Speaker 1: Fonterra be without Consumer and a more simplified strategy going for. 127 00:06:03,240 --> 00:06:07,680 Speaker 2: Yeah, So despite this year's Ingredients being back on last year, 128 00:06:07,720 --> 00:06:10,320 Speaker 2: I mean last year was extraordinary and that was a 129 00:06:10,400 --> 00:06:12,599 Speaker 2: year that we've never seen before in our ingredient's business. 130 00:06:12,600 --> 00:06:15,600 Speaker 2: Given the stream the relativities between the reference and non reference. 131 00:06:16,080 --> 00:06:18,320 Speaker 2: So even this year is a very very strong performance 132 00:06:18,360 --> 00:06:20,599 Speaker 2: or ingredients business where you look back over the history, 133 00:06:21,040 --> 00:06:24,960 Speaker 2: So we shouldn't we shouldn't we should acknowledge that in 134 00:06:25,000 --> 00:06:27,080 Speaker 2: our food service business continues to go from strength to 135 00:06:27,440 --> 00:06:29,719 Speaker 2: We think by focusing what we're good at, which is 136 00:06:29,760 --> 00:06:33,160 Speaker 2: collection processing and their B to B business, we think 137 00:06:33,200 --> 00:06:35,839 Speaker 2: there's more upside to be head there than trying to 138 00:06:35,880 --> 00:06:37,320 Speaker 2: chase the consumersiness as well. 139 00:06:37,560 --> 00:06:39,920 Speaker 1: Peter would love your thoughts on the Chinese economy at 140 00:06:39,920 --> 00:06:42,000 Speaker 1: the moment and your ingredients business to mention that again 141 00:06:42,040 --> 00:06:44,160 Speaker 1: there was lower volumes down by about four percent and 142 00:06:44,240 --> 00:06:46,680 Speaker 1: greater China. How are you thinking about that going forward? 143 00:06:47,560 --> 00:06:51,240 Speaker 3: Well, it feels like from a dairy perspective that we're 144 00:06:51,240 --> 00:06:54,160 Speaker 3: on there in China, like demand is particular the last 145 00:06:54,160 --> 00:06:57,440 Speaker 3: couple of months has started to recover and you know 146 00:06:57,600 --> 00:07:01,559 Speaker 3: certain leaders downward pressure on China is mook supply and 147 00:07:01,680 --> 00:07:05,279 Speaker 3: also some potentially aged and treated they've had in the 148 00:07:05,279 --> 00:07:07,840 Speaker 3: home space. That's really a home peller story and that's 149 00:07:07,880 --> 00:07:11,680 Speaker 3: the product of last result for the Chinese. So we're 150 00:07:11,680 --> 00:07:14,000 Speaker 3: feeling a lot better about demand. 151 00:07:14,000 --> 00:07:16,440 Speaker 1: From John Miles, if you had any feedback on that 152 00:07:16,520 --> 00:07:19,280 Speaker 1: nine bucks a midpoint today, So the smiling farmers out there. 153 00:07:20,280 --> 00:07:22,600 Speaker 2: Yeah, the phone has been ringing this morning quite a lot. 154 00:07:22,640 --> 00:07:27,000 Speaker 2: So that's been well received and I think, you know, 155 00:07:27,040 --> 00:07:28,880 Speaker 2: Peter referred to that in the opening. I mean, we've 156 00:07:28,880 --> 00:07:31,240 Speaker 2: come off the back of a couple of tough years 157 00:07:32,720 --> 00:07:36,080 Speaker 2: behind fun Gate, we struggled to break even, and so 158 00:07:36,240 --> 00:07:38,560 Speaker 2: that to be very well welcomed. I think there's some 159 00:07:38,560 --> 00:07:41,239 Speaker 2: probably capital expenditure that farmers haven't been able to invest 160 00:07:41,240 --> 00:07:43,480 Speaker 2: in the last couple of years, and so well, it's 161 00:07:43,520 --> 00:07:46,240 Speaker 2: a fantastic number. You know, there's a couple of years 162 00:07:46,280 --> 00:07:48,520 Speaker 2: catch up that I think our farmers are looking forward to. 163 00:07:48,680 --> 00:07:54,520 Speaker 1: Thanks so much. I appreciate it.