China Food

Annual revenue of nearly 96.3 billion! Fonterra’s growth against the trend in fiscal year 2020, CEO praises China’s performance

Despite the challenge of the global epidemic, Fonterra, a dairy giant in New Zealand, has delivered a report card of its fiscal year against the trend.

This morning, the company announced its fiscal year 2020 results (August 1, 2019 to July 31, 2020), with revenue of $21 billion (about RMB 96.289 billion), an increase of $1.1 billion; gross profit of $3.2 billion, an increase of $200 million; reported after tax profit of $659 million, an increase of $1.3 billion; adjusted after tax profit of $382 million, an increase of $118 million.

In addition, net debt decreased by $1.1 billion to $4.7 billion. The final milk price for the 2019 / 20 milk production season was $7.14 per kilogram of milk solids, with a dividend of $0.05 per share, which resulted in the company’s total cash payments to dairy farmers of $7.19 per kilogram of milk solids.

“The 2019 / 20 milk season is a good year for cooperatives, with rising profits, falling debt and strong milk prices.” Fonterra CEO miles Hurrell said in a statement released today.

“We did well in the first half of 2020. What none of us expected, however, was what happened later – a world in the face of a new epidemic. The continued impact of this global epidemic has indeed affected our performance in the second half of the fiscal year, especially in our consumer brand and catering services business. ” He said.

Fonterra has three business sectors: raw materials, catering services and consumer brands. “The adjusted gross profit of the raw materials business is very strong, and despite the disturbance of the epidemic, the catering service business in Greater China achieved excellent sales and gross profit performance in the first half of the fiscal year, which are the main factors driving the basic business performance.” Mr. Hurrell said today.

Miles Hurrell, CEO of Fonterra, was on the scene of today’s performance meeting

Let’s focus on the latest performance of China business.

New business of probiotics driven by epidemic situation

First, look at the raw materials business. The company did not separately disclose the performance of the Chinese market in its financial report. However, today, fastfood learned from Fonterra that, as the Department with the largest proportion of business in Greater China, the Greater China raw materials division performed well in the sales of products to distributors and producers in fiscal year 2020.

Fonterra China today told the snack generation that the new probiotics business, as well as traditional cheese and whey protein products, “are growing rapidly.”.

Among them, HN019 and hn001, two probiotic strains that “enhance immunity”, were especially welcomed by customers in infant formula, health care products, yogurt and snacks during the epidemic period. In addition, the development of cheese snack market also promoted the sales of cheese products and concentrated milk raw materials in the raw materials department. In the sports nutrition business line, whey protein raw materials of NZMP brand under the raw materials department have also appeared in more substitute meals and fitness products.

According to reports, in fiscal year 2020, Fonterra also helped customers develop many new products, such as “normal temperature yogurt with functional protein as raw material”, “double protein oat milk” catering to the trend of plant-based protein, and “transparent protein water ready to drink beverage”, etc.

Globally, the results show that the adjusted EBIT of Fonterra’s raw materials business increased to $827 million in fiscal year 2020, compared with $790 million in the previous fiscal year, while the adjusted gross profit reached $1.6 billion, an increase of $165 million.

Catering service business has rebounded

Let’s take a look at the catering service business in Greater China that was praised by the CEO of Fonterra global today.

According to the data disclosed today, the adjusted EBIT of Fonterra’s catering service business in Greater China was NZ $169 million (about RMB 774 million) in fiscal year 2020, up from $114 million (about RMB 522 million) in the previous fiscal year.

“This is mainly due to the rebound in butter sales and profit margins, as well as the sale of more products with higher gross margin, such as cream, cream cheese, etc. of Anjia professional dairy product line.” Mr. Hurrell said at the performance meeting today.

Mr. Hurrell said Fonterra’s catering services in Greater China had a strong year-on-year growth in the first half of the fiscal year, but was subsequently hit hard by the closure of restaurants due to the outbreak. After adjustment, gross profit rebounded rapidly from the third quarter, but the current recovery is still not 100%.

The products are currently provided by Anjia. “Our Anjia professional dairy product line (i.e. catering service business) in China has achieved significant growth. We have entered 50 new cities across China, covering 350 cities. Our products are now used not only in Western restaurants and bakeries, but also in restaurants serving Chinese cuisine. ” He said.

Fonterra’s catering services businesses in Asia, Oceania and Latin America were affected by the new outbreak in the fourth quarter, with losses in all three markets in the second half of the fiscal year, according to Hurrell. Nevertheless, the adjusted EBIT of the company’s catering services business increased by 14% to $209 million in fy2020 compared with the previous fiscal year, “thanks to the strong performance of the Greater China business in the first half of the fiscal year.”.

Today, Fonterra China added that despite the impact of the new outbreak on the catering industry, Anjia catering service team achieved “strong performance” in fiscal year 2020. This is due to the team’s strategic layout in the areas of channel change, product application innovation and channel development.

It is revealed that since the implementation of the channel reform strategy four years ago, the number of cities covered by Fonterra’s catering service logistics network has increased seven times. Under the greatly expanded logistics network, the time from placing orders to receiving goods for customers in any region has been shortened from more than 90 days many years ago to only 3 days.

In terms of product application innovation, Fonterra China told the snack agency that in fiscal year 2020, the catering service team launched more than 270 innovative product applications to the market, including Anxin Futuan Dafu series, ice bread series, cheese moon cake, milk capped beer and cheese shrimp skating, which promoted the growth of product sales.

Among them, in the product application of “Zhongdian Xixin”, Fonterra said that its catering service team made a breakthrough in the moon cake channel this year. “More than 50 mid point customers across the country have listed” cheese moon cakes “with Anjia cheese as raw materials, including daoxiangcun, Shen Dacheng, Guangzhou Restaurant and other well-known Chinese time-honored enterprises.”

The rapid rise of new tea in recent years has also continued to drive the growth of the company’s catering service business. It is revealed that through deepening the cooperation with beverage customers from all over the world, Fonterra China’s catering service team is expected to produce more than 600 million cups of milk capped tea in the tea industry in fiscal year 2020.

In addition, the company mentioned that the “China strategic customer department”, which provides localized customized services for large multinational catering enterprises, has made Fonterra a a core dairy supplier of the world’s major catering chain brands in the Chinese market after several years of development. In major dairy products, such as mozzarella cheese, processed cheddar cheese chips and normal temperature milk, Fonterra has become the core dairy supplier of the world’s major catering chain brands Continue to maintain the leading position in the market.

Consumer brand expansion

Finally, take a look at Fonterra’s consumer brand business including Anjia normal temperature milk and Anman milk powder.

The results showed that globally, the adjusted EBIT of Fonterra’s consumer brand business decreased to $149 million from $227 million in the previous fiscal year, mainly due to its relationship with chesdale Gamma Impairment of $57 million related to the goodwill of the brand and New Zealand consumer brand business.

Despite the impact of the new crown outbreak, adjusted EBIT (excluding these impairments) in consumer businesses in Oceania and Asia has improved, the company said. However, adjusted EBIT for the consumer business decreased by 10% after discounting these impairments due to market turmoil in Hong Kong and Chile.

Specific to the Chinese market, xiaoshidai learned from Fonterra today that its consumer brand Department has completed the strategic upgrading and further optimized its product portfolio in fiscal year 2020. Since entering the Chinese market for six years, the business has developed from one product to nearly 50 product combinations including normal temperature milk, fresh milk, companion milk and adult milk powder.

In terms of product innovation, in fiscal year 2020, Fonterra consumer brand launched several new products in China, such as Anjia’s first children’s cheese stick, Anman’s high-end pregnant milk powder “Beiyu” and fenglifu brand fresh milk. At the same time, it also launched a number of customized normal temperature milk product packaging for the Chinese market, including Anjia 1886 retro gift box, aofei Q pet children’s milk, etc.

In terms of channels, the company disclosed to the snacks agency that at present, the consumer brand business of Fonterra China has entered nearly 300 prefecture level cities and more than 10000 stores with the help of more than 100 offline distributors. In addition, in the e-commerce channel, during 618 of this year, Anjia normal temperature full fat milk became the first in the list of imported milk brands of Jingdong for the fourth consecutive year, and Anman also entered the top list of Jingdong cross-border milk powder for the first time.

Looking ahead to the next fiscal year, Fonterra said today that the guidance range of EPS for 2020 / 21 is $0.2-0.35, and reiterated that its forecast range of final raw milk purchase price for 2020 / 21 milk season is between $5.90 and $6.90 per kilogram of milk solids.      

        

John Monaghan, chairman of Fonterra, said the outbreak was still affecting the world. “We see that there are still significant uncertainties in the market, including how the global recession and the new wave of new outbreaks will affect global demand.” Because of these uncertainties, he said, the company has given a wider range of expected returns than usual, given the beginning of the financial year.

“We will monitor the situation throughout the quarter, and over time, we expect the earnings range to narrow.” “The best way to deal with uncertainty is to stick to the strategy and focus on what we can control,” Monaghan said. We need to be agile and use our strengths across the supply chain to manage and adapt to changing global situations. ”  

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