Fonterra wins Deloitte Top 200 Best Performer Award.Video/Michael Craig
Compared to many other companies, Fonterra has had to weather current global market conditions – with weaker forecasts for next year – but the dairy giant is undeterred as it continues to implement an agile and sustainable growth strategy.
As part of its 2030 plan, Fonterra is focusing on the value of New Zealand milk, achieving zero carbon emissions by 2050, promoting dairy innovation and research, including new products, and returning about $1 billion to farm shareholders.
Fonterra operates three divisions – Consumer (Milk), Ingredients and Catering – and is expanding its range of cream cheeses. She developed the MinION genome sequencing device, which delivers dairy DNA faster and cheaper, as well as whey protein concentrate, which is used to create various yogurt textures.
CEO Miles Harrell said: “We continue to believe that New Zealand milk is the highest quality milk and the most popular milk in the world. Thanks to our pasture fattening model, our milk’s carbon footprint is one-third that of the global average for milk. production.
“Just over a year ago, during Covid-19, we redefined our ambitions, strengthened our balance sheet and strengthened our foundations. We believe the foundations of New Zealand dairy are strong.
“We see that the overall supply of milk here is likely to decline, at best, unchanged. This gives us the opportunity to realize the value of milk through three strategic options – focus on the milk bank, lead in innovation and science, and lead in sustainability “.
“While the environment in which we operate has changed significantly, we have gone from reboot to growth as we serve our customers, our farmer shareholders and across New Zealand, adding value and meeting the growing demand for sustainable dairy products. . Serve.
“This is a testament to the resilience and determination of our employees. I am very proud of what we have been able to achieve together.”
The judges of the Deloitte Top 200 Awards thought so too, naming Fonterra the winner in the best performance category, ahead of other raw material producers and global exporters Silver Fern Farms and 70-year-old Steel & Tube.
Judge Ross George said that as a $20 billion company owned by 10,000 farmers, Fonterra plays an important role in the economy, “especially for many rural communities.”
This year, Fonterra paid almost $14 billion to its dairy farm suppliers. The judges noted the positive developments in the business, helped by a revamped local management team.
“Fonterra has occasionally faced backlash against its industry. But she has taken steps to become more sustainable and recently launched a plan to reduce cattle emissions by testing seaweed as supplemental feed for dairy cows and working with the government. Reducing permaculture emissions,” said George, managing director of Direct Capital.
For the fiscal year ending June, Fonterra achieved $23.4 billion in revenue, up 11%, mainly due to higher product prices; earnings before interest of $991 million, up 4%; normalized profit was $591 million, up 1%. Milk collection fell by 4% to 1.478 billion kg of milk solids (MS).
The largest markets in Africa, the Middle East, Europe, North Asia and the Americas (AMENA) accounted for $8.6 billion in sales, Asia-Pacific (including New Zealand and Australia) for $7.87 billion and Greater China for $6.6 billion dollars.
The co-op returned $13.7 billion to the economy through record farm payments of $9.30/kg and a dividend of 20 cents/share, paying a total of $9.50/kg for milk delivered. Fonterra’s earnings per share were 35 cents, up 1 cent, and it is expected to earn 45-60 cents per share in the fiscal year at an average price of $9.25/kgMS.
His forecast for 2030 calls for EBIT of $1.325 billion, earnings per share of 55-65 cents, and dividends of 30-35 cents per share.
By 2030, Fonterra plans to invest $1 billion in sustainability, $1 billion in redirecting more milk to more expensive products, $160 per year in research and development, and distribute $10 to shareholders after the sale of assets (one hundred million US dollars).
It may come sooner or later. Fonterra announced last month that it was selling its Chilean Soprole business to Gloria Foods for $1,055. “We are now in the final stages of the sale process following the decision not to sell our Australian business,” Harrell said.
In terms of sustainability, water consumption at production sites in regions with limited water resources has decreased and is now below the 2018 baseline, and 71% of shareholders have an on-farm environmental plan.
Some still say that Fonterra is in the wrong industry, in the wrong country, dairies around the world are on the market and close to consumers. If so, Fonterra has bridged this gap through concentration, innovation and quality and has succeeded by becoming a very important part of the economy.
Leading meat processor Silver Fern Farms has mastered the art of adapting in the face of COVID-19 and supply chain challenges, leading to a record fiscal year.
“All three parts of our business interact closely with each other: sales and marketing, operations (14 factories and 7,000 employees) and 13,000 farmers who supply us with products. This was not the case in the past,” Silver said. Simon Limmer said.
“These three parts work very well together – cohesion and competence are the key to our success.
“We managed to enter the market in an unstable, disruptive environment and changing demand in China and the US. We are reaping good market returns.
“We will continue our farmer-centric and market-driven strategy, continue to invest in our brand (New Zealand Grass Fed Meat) and get closer to our overseas customers,” said Limmer.
Dunedin’s Silver Fern revenue rose 10% to $2.75 billion last year, while net income increased to $103 million from $65 million. This time around – and Silver Fern’s report is for a calendar year – revenue is expected to rise by more than $3 billion and profits to double. It is one of the ten largest companies in the country.
The judges said that Silver Fern has succeeded in a complex 50/50 ownership structure between its farmers’ cooperative and China’s Shanghai Meilin.
“Silver Fern is working on the branding and strategic positioning of its venison, lamb and beef products and is paying particular attention to their environmental status. Sustainability is becoming a central part of decision making with the express aim of turning the company into a profitable meat brand,” the judges said.
Most recently, capex reached $250 million, investing in infrastructure (such as automated processing lines), relationships with farmers and marketers, new products (premium zero beef, the first of its kind, recently launched in New York), and digital technologies.
“Three years ago we didn’t have anyone in China, and now we have 30 sales and marketing people in our Shanghai office,” Limmer said. “It’s important to have a direct connection with the customers – they don’t just want to eat meat, they want to eat meat.” ”
Silver Fern is part of a joint venture with Fonterra, Ravensdown and others to develop new technologies to reduce methane emissions and improve farming practices.
It pays farmers incentives to offset their farms’ carbon emissions. “We set a purchase price every two months up front, and when we get higher market returns, we send a signal to our suppliers that we are willing to share the risk and reward,” Limmer said.
Steel & Tube’s transformation is complete, and now the 70-year-old company can continue to focus on growing and strengthening customer relationships.
“We have a really good team and experienced directors who have spent some fantastic years driving business transformation,” said CEO Mark Malpass. “It’s all about people and we’ve built a strong culture of high engagement.”
“We have strengthened our balance sheet, made several acquisitions, digitized, made sure our operations were cost effective and efficient, and gained a deep understanding of our customer base and their needs,” he said.
A decade earlier, Steel & Tube had been listed on NZX in 1967, faded into obscurity, and “corporated” under Australian rule. The company accumulated $140 million in debt as new players entered the market.
“Steel & Tube had to go through extensive financial restructuring and funding under pressure,” Malpass said. “Everyone was behind us and it took a year or two to recover. We have been building a value proposition for customers over the last three years.”
The return of Steel and Tube is impressive. For the fiscal year ended June, the steel refiner and distributor reported revenue of $599.1 million, up 24.6%, operating income (EBITDA) of $66.9 million, up 77.9%. %, net income of $30.2 million, up 96.4%, EPS 18.3 cents, up 96.8%. Its annual production increased by 5.7% to 167,000 tons from 158,000 tons.
The judges said Steel & Tube is a longtime player and public figure in an important New Zealand industry. Over the past 12 months, the company has been one of the best companies in a difficult economic environment with a total shareholder return of 48%.
“Steel & Tube’s board and management took on a difficult situation but managed to transform the business and communicated well throughout the process. They also responded strongly to Australian and import competition, managing to become a permanent firm in an extremely competitive industry,” a company spokesperson said. judges.
Steel & Tube, which employs 850 people, reduced its number of operating plants nationwide from 50 to 27 and achieved a 20% cost reduction. It has invested in new equipment to expand its plate processing and acquired two companies to expand its offerings, Fasteners NZ and Kiwi Pipe and Fittings, which is now boosting the group’s bottom line.
Steel & Tube has produced composite decking rolls for the Business Bay shopping center in Auckland, whose stainless steel cladding is used in the new Christchurch Convention Centre.
The company has 12,000 customers and is “developing strong relationships” with its first 800 customers, which account for two-thirds of its revenue. “We have developed a digital platform so that they can order efficiently and receive certifications (testing and quality) quickly,” said Malpass.
“We have a warehouse system in place where we can forecast customer demand six months in advance and make sure we have the right product for our margin.”
With a market capitalization of $215 million, Steel & Tube is roughly the 60th largest stock in the stock market. Malpass aims to beat 9 or 10 companies and get into the top 50 NZX.
“This will provide more liquidity and analyst coverage of the stock. Liquidity is important, we also need a market capitalization of $100 million.”
Post time: Dec-31-2022