Dairy manufacturer and unit trust linked to its co-op dairy business in New Zealand, Fonterra Shareholder’s Fund [ASX:FSF], was busy making announcements this morning pertaining to its FY2023 interim results, and its intentions to buyback more shares after its current $50 million buyback.
Profit after tax came to NZ$546 million for the half year, an increase of 50%, leading to an interim dividend of 10 cents a share.
FSF’s shares flew skyward 10.5% following the announcements, selling for $3.12 at the time of writing:
Source: TradingView
Fonterra to pay 10 cent dividends
Today, Fonterra’s Co-operating Group released its 2023 Interim Results, representing a half-year profit after tax increase of 50%, totalling NZ$546 million.
This has resulted in the group also upgrading its full-year forecast earnings from the range of 50–70 cents a share, now upped to 55–75 cents a share.
The group also proposed free tax capital return to farmer owners and holders of around 50 cents a share — although this hinges on the sale of its Chilean Soprole business.
Current earnings per share are tracking at 33 cents each and return on capital is sitting around the 8.6% mark, which has increased from 6.1%.
Fonterra’s results have resulted in an interim dividend of 10 cents a share, which was also helped by the forecast Farmgate Milk price range of $8.20–8.80 per kgMS.
The group’s CEO Miles Hurrell claims that the first half of the year indicates a business that is performing well, buoyed by the rise of 50% in profit, even as market volatility has been harsh in the last few months.
Hurrell believes Fonterra’s lift in earnings comes down to the company’s ability to move farmer’s milk into products and markets where prices are more favourable.
Most favourable margins were achieved in cheese and protein, and in capturing these markets, the group managed to achieve normalised EBIT in ingredients segment, which came to $911 million.
Mr Hurrell stated:
‘Our Co-op’s scale and diversification across channels and markets has enabled us to navigate through disruption and make the most of favourable market conditions in a number of areas.
‘While milk powder prices have softened recently, impacting our forecast Farmgate Milk Price range, protein prices have been high, and this is reflected in the lift in earnings we’re reporting today.
‘Our improved earnings and strong balance sheet have enabled us to pay an interim dividend of 10 cents per share which is positive news for our farmer owners and unit holders. We also expect to be able to pay a strong full year dividend, in addition to our proposed capital return.
‘The outlook for high quality sustainable New Zealand dairy remains positive. We have a clear strategy and are well-positioned to take advantage of this demand.’
Fonterra’s $50 million buyback scheme
Along with the release of its interim FY23 results, the group also confirmed its ‘flexible shareholding’ will begin on 28 March, in the form of a Transitional Buyback.
The group aims to follow-up its $50 million buyback program and has allocated up to $300 million for liquidity support.
Fonterra says the maximum number of shares it may purchase could be as high as 75 million, at market price, and will occur over 11 weeks:
Source: FSF
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