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New Zealand dairy cooperative Fonterra backtracks Australia business sell

New Zealand dairy cooperative Fonterra has backtracked on its plans to sell its Australian arm, saying business in the country is “going well”.

The group, owned by 10,000 New Zealand farmers, last year announced plans to divest its business in Australia, as well as Chilean dairy brand Soprole.

But, in its annual results today (22 September), the co-op reported a year of increased revenue and profit – and confirmed the Australian venture is key to reaching its 2030 targets, including plans to return about NZD1bn (US$584.8m) to shareholders and unitholders by the end of 2024.

Chief executive Miles Hurrell said: “We’ve looked at a number of options for our Australian business and have decided that it’s in the co-op’s best interests to maintain full ownership.

“Australia plays an important role in our consumer strategy with a number of common and complementary brands and products and as a destination for our New Zealand milk solids.

“The business is going well, and it will play a key role in helping us get to our 2030 strategic targets.”

The company’s plans to divest Soprole and its milk supplier Prolesur remain in place, however.

Hurrell, who took over the company’s leadership in 2018, confirmed: “The sales process for the Soprole business [is] progressing.”

Last year, he explained: “Soprole is a leading Chilean dairy brand, and Prolesur is a subsidiary of Soprole focused on sourcing milk and manufacturing products in Southern Chile. The operations do not require any New Zealand-sourced milk or expertise, and in this context, we are starting the process to divest our integrated investment in Chile.”

Fonterra’s announcement comes as Canadian dairy giant Saputo announced it may be closing plants in Victoria, Australia, citing strategic “optimisation”.

Last year, Fonterra, the world’s largest dairy exporter, also exited joint-venture farms in China and sold assets in the Asian country, while in 2019 it sold its share in an ingredients venture with Netherlands-based dairy major FrieslandCampina – DFE Pharma.

The cooperative reported an 11% growth in group revenue, to NZD23.4bn, for the 2022 financial year, and a 4% increase in normalised EBIT to NZD991m. Normalised earnings per share were up 1% to NZD0.35.

Fonterra said its annual results reflect strong progress towards its strategy to “focus on New Zealand milk, be a leader in sustainability and a leader in dairy innovation and science”.

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