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Turning around the milk tanker

Key highlights

After a poor 2014/15, Fonterra has posted improved 2015/16 results.
And, signals further improvement over 2016/17.
For our part, we are cautiously optimistic on further financial improvements, while maintaining our confidence on a lifting milk price.

Report prepared by:

Nathan Penny, ASB Rural Economist
Phone: +64 9 448 8778
Email: nathan.penny@asb.co.nz

Fonterra has had a better year. Normalised EBIT was up 39%. Net profit after tax was up 65%. Debt was reduced by $1.6 billion. And return on capital lifted to 12.4% from 8.9%.

At first glance, these numbers were all very positive – but, in short, they needed to be. Last year’s results were, to put it plainly, poor. As a result, comparisons with last year will always flatter this year’s results. Indeed, the improvement this year was both needed and expected.

In that context, it is not the turnaround in this year’s results that will shed light on Fonterra’s performance and strategy. Instead, it is what happens from here that matters.

Looking ahead, the signs are positive so far. Fonterra has signalled further improvements are likely over 2016/17. However, of course there is a lot that can happen between now and the end of the new financial year. As such, the proof will be in the pudding.

Read the full PDF Report

Important Disclaimer - The views expressed herein are those of the authors and are based on information believed but not warranted to be correct. Any views or information, whilst given in good faith, are not necessarily the views of ASB Bank Limited and are given with an express disclaimer of responsibility and no right of action shall arise against any of the authors, ASB Bank Limited or its employees either directly or indirectly out of any views, advice or information.
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