Fonterra has posted a net loss of $605 million, at the lower end of the forecast range, largely due to asset writedowns of $826m.

The loss to the end of July is at the lower end of its $590m to $675m forecast it disclosed in July, and compares with a $196m loss the year earlier.

Excluding the one-off items, Fonterra made a $819m underlying profit, a 9 percent fall. It will pay a Farmgate Milk Price of $6.35 per kilo of milk solids, with no dividend.

Its capital expenditure fell 30 percent to $600m.

Fonterra chief executive Miles Hurrell said Fonterra’s normalised earnings per share for the year was 17 cents.

“I’m pleased with the progress we’ve made with our financial discipline. You can see it in our improved cashflow, reduced debt and significant cost savings,” he said.

He said the moves made to review Fonterra’s assets would not be a one-off.

“Clearly, any write-down of an asset is not done lightly. But what I hope people can also see is that we’re leading the co-op with a clear line of sight on potential opportunities as well as the risks.

“We need to be continuously reviewing our assets and making sure they are meeting the changing needs of our co-op.”

He said Fonterra was planning to focus on ingredients in paediatrics, medical and ageing, sports, and core dairy categories, and would start “rationalising” its use of offshore milk components.

“We now have a strategy that is built from the belief that our farmers’ milk here in New Zealand is the best and most precious in the world.”

Fonterra last month said it was expecting to post a loss of $590 million to $675m, and announced yesterday it was selling its half share in DFE Pharma to reduce debt.

Delaying its results early this month, it also froze the pay of about 6000 of its highest-earning staff for 12 months.

Federated Farmers’ Chris Lewis told Morning Report ahead of the release the hope for farmers was that the period of difficulty and resetting was over, and this would be the cooperative’s first evidence of a change in direction.

“It looks like it’s going to be the plan, hopefully it’s not another year of write-downs.

“If that happens it will really really really dent farmer confidence, but it looks like they’ll try and clear out the house today and try and focus on a clear strategy or plan forward.

He said farmers wanted to see a clear plan for how the cooperative would perform in future.

“End of day, performance answers all the critics … you can write all the big strategies, put all the fancy words in and say all the nice things but end of the day it comes down to performance and if you need a really good culture and it needs to be led from the top.”

He said underlying earnings and a reduction of debt would be critical markers, and he expected there would be some restructuring.

“There’s been a lot of rumours come out of Fonterra around restructuring, it’s obviously got too many staff, it’s top heavy … farmers will be looking for a fit and trim Fonterra that can perform well and you can’t do that when you’re bloated.”

This article was originally published on RNZ and re-published with permission.

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