Fonterra Shareholders’ Fund (ASX: FSF) has announced strong growth in its FY20 result today.
Fonterra is a huge dairy co-operative which has a variety of brands including Anchor, Anmum, Anlene, Mainland, Perfect Italiano, NZMP, Symbio, and Farm Source. Its products are sold in 130 countries. It manufactures from more than 30 sites and more than a quarter of New Zealand’s exports are Fonterra dairy products.
FY20 result
Fonterra reported that its normalised gross profit grew by 6.6% to $3.2 billion,
Its normalised EBIT (click here to learn what EBIT means) grew by 8.25% to $879 million.
Actual EBIT grew by $1.2 billion to $1.1 billion. It reversed from a loss of $100 million in FY19.
Normalised profit after tax grew by 45% to $382 million and reported profit after tax jumped by $1.3 billion to $659 million. It generated normalised earnings per share (EPS) of 24 cents.
It generated free cashflow of $1.8 billion, up by $733 million from FY19.
Fonterra said that the final cash payout for the 19/20 season was $7.19 per kgMS with the final farmgate milk price being $7.14 per kgMS.
Fonterra’s net debt finished at $4.7 billion, down $1.1 billion. It announced a final dividend of 5 cents per share. Fonterra expects to keep paying dividends, assuming normal operating conditions.
Outlook
Fonterra has provided FY21 guidance of 20 cents to 35 cents, so normalised profit could fall or rise materially in this year.
The forecast farmgate milk price range is between $5.90 per kgMS to $6.90 per kgMS.
This was a solid improvement by Fonterra. It’s good to see net debt improve significantly and dividend payments start. However, a commodity business isn’t my best investment idea because of the limited control of prices (and profit). Instead, I like ASX growth shares such as Pushpay Holdings Ltd (ASX: PPH).
