Fonterra earnings: Now sees 2019-20 milk price of NZ$7.10-NZ$7.30/kg

Fonterra says wide ranging milk price forecast for new season reflects global uncertainty; mid-price for current season now set at $7.20; earnings for current year still picked to be between 15c-25c a share.

This supply and demand imbalance has impacted GlobalDairyTrade (GDT) prices for the products that determine our Farmgate Milk Price. In US dollar terms, GDT prices for Whole Milk Powder are down 17% since late January,"

Fonterra chairman John Monaghan said afterthe organisaiton posted a near 59% rise in nine-month underlying operating profit on Thursday, helped by robust demand for dairy products.

Fonterra earnings summary

• Total Group Earnings Before Interest and Tax (EBIT): $1.1 billion, up from $378 million.
• Total Group normalised EBIT: $815 million, up from $514 million.
• Total Group normalised gross margin: $2.5 billion, up from $2.2 billion.
• Normalised Total Group operating expenses: $1,665 million, down $148 million from $1,813 million.
• Free cash flow: $698 million, up $1.4 billion.
• Net debt: $5.7 billion, down from $7.4 billion.
• Normalised Ingredients EBIT: $668 million, up from $615 million.
• Normalised Foodservice EBIT: $208 million, up from $135 million.
• Normalised Consumer EBIT: $187 million, up from $128 million.
• Full year forecast underlying earnings: 15-25 cents per share.
• 2019/20 forecast Farmgate Milk Price range: $7.10 - $7.30 per kgMS.
• Opening 2020/21 forecast Farmgate Milk Price range: $5.40 - $6.90 per kgMS.
• 2020/21 Advance Rate Schedule has been set off the mid-point of $6.15 per kgMS.

About Fonterra: The company is responsible for approximately 30% of the world's dairy exports and with revenue exceeding NZ$17.2 billion, is New Zealand's largest company.

Meanwhile, the kiwi's price action remains strong as the bird benefits from a risk-on vibe and the USD comes under pressure.

There are as many reasons to be bullish (we have beaten COVID-19, commodity prices are holding up, risk appetite has bounded back quickly) as there are to be bearish (tourism was a big piece of the economy and it’s now gone, our yields are lower than the US and Australia’s, negative rates might be coming, risk sentiment could sour at any time), which makes the outlook tricky. But for now, the market loves Kiwi and it looks set to stay that way for a while, especially while the mood is still good. 0.6170 beckons again,

analysts at ANZ Bank explained. 

We will have RBNZ Chief Economist speaking on monetary policy at the top of the hour.