A drought shrank yearly revenue at New Zealand dairy giant Fonterra, but the company said today that Chinese demand for milk powder remains robust.
Fonterra is New Zealand's largest company and a bellwether for the fortunes of the South Pacific nation's farming-driven economy.
The company announced that in the fiscal year ending July 31, revenue was down 6 per cent at 18.6 billion New Zealand dollars after a drought dried fields and lowered milk volumes.
Profit before tax was down 3 per cent at NZ dollar 1 billion while profit after tax was up 18 per cent at NZ dollar 736 million.
Fonterra's reputation was dented last month when it triggered a global recall of infant formula due to fears that it was contaminated with botulism bacteria.
Further testing showed it was likely a false alarm. Any financial fallout from the scare will be reflected in next year's results.
However, any impact appears to have been short-lived with international dairy prices remaining at elevated levels. As a result, Fonterra yesterday it was increasing its forecast payout to farmers by 50 cents to NZ dollar 8.30 per km of milk solids. The company cautioned that dairy prices remain volatile.
Farmers are hoping for a bumper milk season this year after a mild and wet Southern Hemisphere winter provided ideal growth conditions for the grass that cows feed on.
Fonterra is a cooperative owned by 10,500 farmers.
