Record dividend as Fonterra reveals it’s full year results, the trade minister signals shift in approach to international agreements, and farms are facing a tech talent crunch.

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Record dividend as Fonterra reveals it’s full year results

Fonterra has announced its second-largest dividend on record, bringing welcome news to dairy farmers across the country. The dairy giant has unveiled its full-year results,revealing a robust financial performance driven by higher margins and increased volume in food and consumer channels.

The co-op reported a net profit from continuing operations of $1.168 billion, translating to 70 cents per share. While earnings dipped slightly from the previous year's elevated levels, Fonterra maintained a healthy 17% gross margin and achieved an 11.3% return on capital.

Fonterra has declared a total dividend of 55 cents per share. This includes a 15-cent interim dividend, a 25-cent final dividend, and an additional 15-cent special dividend. 

Looking ahead, Fonterra has raised its forecast milk price for the current season. The new midpoint stands at $9 per kilogram of milk solids, with a range of $8.25 to $9.75. This uplift signals confidence in market conditions and should hearten farmers planning for the year ahead.

On the financial front, Fonterra's balance sheet remains sturdy. Net debt decreased by $600 million to $2.6 billion, affording the co-op flexibility and resilience against market volatility. However, farmers should note that Fonterra has exhausted its tax losses and will now be paying tax, which may affect future earnings per share.

Friday’s Dairy Exporter podcast will have an in depth look into Fonterras results, and how they affect our dairy farmers.  

No update on Fonterra’s consumer product arms future

Meanwhile Fonterra remains tight-lipped about the future of its consumer products arm, valued at over $3 billion. The company announced it will wait until November to provide a meaningful update on its divestment deliberations, with any potential sale still many months away.

Fonterra's leadership team, including Chairman Peter McBride and CEO Miles Hurrell, addressed the media following the results announcement. Hurrell hinted at the company's evolving strategy, noting that Fonterra may not be the ideal owner of consumer-focused operations. However, McBride clarified that this statement doesn't guarantee a sale, emphasising that multiple pathways are under consideration.

The company plans to unveil its updated business strategy next Monday, outlining expected outcomes for both farmer-shareholders and unit holders. Fonterra's nearly 8,000 farmer-shareholders will have the final say on any sale proposal through a voting process.

Wellington welcomes UAE Trade envoy for rural growth talks

Rural communities could reap the rewards of strengthened trade ties with the United Arab Emirates as a high-level delegation arrives this week. UAE Minister of State for Foreign Trade, Dr Thani Al Zeyoudi, touched down in Wellington yesterday for a three-day visit.

The UAE currently ranks as New Zealand's 10th largest trading partner, with two-way trade amounting to $1.3 billion annually.

During his stay, Dr Al Zeyoudi will engage with Parliamentary and industry leaders, aiming to deepen connections across various sectors.

For our rural and agricultural sectors, this diplomatic engagement could open doors to new market opportunities. The UAE, with its growing demand for high-quality food products, presents a lucrative market for Kiwi farmers and producers.

The trade minister signals shift in approach to international agreements

Staying with trade, Minister Todd McClay says there will be a significant change in the country's approach to international trade negotiations. McClay has outlined a more pragmatic and politically-driven strategy to create opportunities for Kiwi exporters.

The Minister says that the era of comprehensive Free Trade Agreements is waning. Instead, New Zealand is now focusing on what McClay terms as "trade agreements," reflecting a global trend towards increased protectionism.

This shift in terminology and approach marks a departure from the trade liberalisation ideals of the past. McClay compared the current situation to the challenges faced in the 1970s and 80s when Britain joined the European Economic Community, forcing New Zealand to rapidly find new markets for its agricultural products.

The new strategy calls for a more active role from government officials in securing trade deals. As part of this hands-on approach, the Prime Minister and Deputy Prime Minister have been actively engaging on the world stage. 

A key focus of the government's trade strategy is India. McClay revealed he has met with his Indian counterpart five times in the past nine months, developing a constructive relationship. The Minister stressed that any future agreement with India must include meaningful gains for New Zealand's primary food and fibre sector.

Farms are facing a tech talent crunch

Our agricultural sector is grappling with an unexpected challenge: finding farm workers who are as comfortable with computers as they are with cattle. The modern farmer's toolkit now includes smartphones and tablets alongside traditional equipment, highlighting a growing need for digital literacy in rural communities.

Southland Federated Farmers President Jason Herrick says farmers are spending more time on devices due to increased reporting requirements. This shift means that farming, once considered an ideal career for those less academically inclined, now demands a higher level of education.

The skills gap is particularly evident in rural areas. Primary ITO, which leads work-based training in the food and fibre sector, reports that 20% of their students have no previous qualifications. In some rural regions, 35% of Kiwis lack internet access at home, limiting opportunities for young people to develop crucial digital skills.

Primary ITO's Leigh-Anne Buxton highlights the range of digital tools used in today's farming operations. From dairy shed management to farm budgeting, animal health tracking to feed analysis, farmers at all career stages must navigate multiple platforms and applications.

To address this challenge, the government has committed $163 million over four years to support Digital Services in schools. This investment aims to enhance cyber security and replace outdated equipment, potentially helping bridge the digital gap in rural areas.