Fonterra Co-operative Group Ltd, a leading dairy company, has had a promising start to the 2023/24 financial year. They’ve increased their expected price for milk, known as the Farmgate Milk Price, to an average of $7.50 per kgMS. This is a 25-cent rise from their previous estimate, now ranging between $7.00 to $8.00 per kgMS.

CEO Miles Hurrell attributes this boost to stronger demand for dairy products, especially from important markets like China. He notes that global dairy prices are up, and Fonterra has secured a good number of sales early in the year. However, he cautions that market prices can still fluctuate and promises to keep a close watch.

Summary Points:
  1. Fonterra has raised its forecast Farmgate Milk Price to $7.50 per kgMS, reflecting strong demand and market performance.
  2. The company’s earnings have significantly improved, with a notable increase in profit and EBIT from last year.
  3. Fonterra is making strategic moves, like selling off international assets, to focus on New Zealand milk and sustainable practices.

Fonterra also reports a significant increase in earnings for the first quarter. Their profit has jumped by 85% compared to last year, reaching $392 million, and EBIT (Earnings Before Interest and Taxes) is up by 63% to $575 million. These earnings primarily come from their ongoing business, excluding the sale of their Brazil operations.

Hurrell explains that this financial success is due to better performance across their Ingredients, Foodservice, and Consumer channels, with gross margins increasing significantly. They’ve also been focusing more on channels that bring higher returns and have seen continued success in New Zealand, though Australia faces some challenges.

Fonterra expects these high margins to last into the first half of the year but anticipates some tightening later due to increased costs and changing market prices. This outlook has led them to raise their earnings forecast to 50-65 cents per share.

The company is also progressing in its strategic goals. They’ve recently sold their business in Brazil, focusing more on New Zealand milk. Fonterra is also innovating, like launching a muscle-loss targeting milk powder in Japan and a probiotic cake in Greater China. They’re also committed to sustainability, setting a goal to cut farm emissions intensity by 30% by 2030.

Overall, Fonterra is pleased with its first quarter results and remains focused on achieving its long-term goals.

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