Fonterra Won’t Sell Stake in Australian Assets as Profit Climbs

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(Bloomberg) -- Fonterra Cooperative Group, the world’s biggest dairy exporter, said it has decided not to sell a stake in its Australian business and indicated this may impact on the size of its planned capital return to shareholders.

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“We are still committed to targeting a significant capital return to our shareholders and unitholders,” Auckland-based Fonterra said Thursday when releasing its annual results. “The amount of any capital return will ultimately be determined on a number of factors including the successful completion of the divestment program as well as our ongoing debt and earnings levels.”

A year ago, Fonterra said it was considering an IPO for its Australian operations as part of its divestment program and intended to return about NZ$1 billion ($585 million) to shareholders by 2024. After a global expansion turned sour, the company restructured in 2018 and returned its focus to New Zealand milk.

Fonterra, which is owned by its 10,000 New Zealand farmer shareholders, today reported normalized net income of NZ$591 million for the year ended July 31, up 1% on a year earlier. Revenue rose 11% to NZ$23.4 billion. The company paid a record milk price to its farmers of NZ$9.30 per kilogram of milksolids and announced a final dividend of 15 NZ cents, taking the full-year dividend to 20 cents.

Milk price payments alone pumped NZ$13.7 billion into the New Zealand economy this year, Fonterra said.

The cooperative continues to make progress in divesting its Soprole business in Chile but has decided to maintain full ownership of its Australian assets, Chief Executive Miles Hurrell said.

“Australia plays an important role in our consumer strategy with a number of common and complementary brands and products and as a destination for our New Zealand milk solids,” he said. “The business is going well, and it will play a key role in helping us get to our 2030 strategic targets.”

Fonterra said revenue, margin and earnings from its Australian unit all improved in the full year.

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