Fonterra has launched a revised strategy today and in it, the New Zealand dairy cooperative promises a higher dividend and return to its member dairy farmers. Fonterra also continues to stick to the course of adding more value to milk through a strong focus on high-quality dairy ingredients.
The revised strategy does not contain many surprises, as Fonterra mainly wants to continue the set course. Lately, Fonterra has been specifically focusing on high-quality dairy ingredients for the business to business segment. As a result, several consumer companies have recently been divested, or are yet to be divested. The Australian division, for example, is still up for sale. Allegedly, FrieslandCampina is interested in this. Furthermore, Fonterra emphasizes that New Zealand milk is the foundation. Chinese dairy farms have therefore already been divested.
More dividend
Fonterra expects that the course set will yield more return. Concrete expectations are also linked to this, which are higher than in the past. For instance, the return on invested capital target has been raised to 10% to 12%. Previously, it was 9% to 10%. The dividend policy has also been tightened. In the future, 60% to 80% of the profit will be paid out in the form of dividend to the member dairy farmers. Previously, it was 40% to 60%. The higher targets will not come at the expense of the base milk price, as promised by the management. The goal is to achieve the highest milk price in New Zealand, as this has not always been the case in recent years.
CEO Miles Hurrel states that the foundation at Fonterra is in good order. According to him, the recently published annual figures for 2023/24, which were above the five-year average, are proof of this.