Fonterra Australia 'fit and ready' for COVID-19

Yesterday, New Zealand dairy giant, Fonterra Co-operative Group Limited, announced a normalised net profit after tax of $293 million, up from $72 million.

Australia's results are not separately released but comprise two parts: ingredients, and consumer and food services.

Fonterra revealed it had reduced its half-year loss on Australian ingredients by $25 million to $3 million.

"Our consumer and food service business are slightly ahead of where we thought they'd be and our ingredients business has delivered its budget," Fonterra Australia managing director Rene Dedoncker said.

"So at the half-year mark, we're in a really strong position, a good position and we're set up well for probably a bumpy second half given coronavirus, but we're in the best position we could possibly be in right now."

Global Fonterra chief executive Miles Hurrell said the Australian arm still had work to do.

"Consumer and food service continues to go from strength to strength and we've had a very good performance for the first six months of the year," Mr Hurrell said.

"And, from an ingredients perspective, an increase from where we were last year.

"There's still more work to do but we've made some significant changes to our business over the last six months in terms of reducing costs and simplifying our business there and that has contributed to a better performance."

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Mr Dedoncker was not concerned by Fonterra Australia's slide in milk supply.

"We are 16 per cent down on this time last year and, just to give context, we know that our largest competitors are also down about 13pc," he said.

"But the real question is, do we have enough milk to prioritise our business?

"We started over a year ago, changing our business model, we've got really clear that consumer and food service are priorities, alongside nutritionals and value-add ingredients.

"We've stopped a lot of other things, so I have enough milk to service those businesses.

"We are not working with brokers, we have some third party milk.

"This time last year, we had a lot of pass-through third-party milk we no longer have that ... So just to be clear, we have less milk. Yes, we do.

"Do we have enough milk to run our business and be successful? Yes, we do."

Mr Dedoncker expected milk flows would not be affected by coronavirus control measures.

Fonterra Australia had been preparing COVID-19 contingency plans for weeks to avoid any factory closures.

"The chances [of a plant shutdown] we believe are very low," Mr Dedoncker said.

"And we are working now to ensure that, if there is any instance at all, that we're putting out protection measures immediately to ensure continuity.

"I can't predict the future but we're really well prepared for all of the circumstances that we believe are possible."

Mr Dedoncker stressed that Fonterra Australia was well prepared for the impact of COVID-19 and would pay for any milk it could not collect from farmer-suppliers in any emergency shutdown.