Fonterra’s management is still confident the earnings guidance of 20c to 35c is achievable with the 40c/kg milksolids higher milk price forecast, chief executive Miles Hurrell said at the annual meeting.
But he drew attention to key assumptions in those forecasts, including recovery from covid-19 in China and other Asian markets, along with lower financing costs and less significant one-off items like impairments.
Nor was Fonterra expecting a repeat of the changing price relativities between reference and non-reference products as occurred in the second half of FY2020.
The big unknowns included currency exchange rates, what will happen to milk supplies out of Europe and the United States and further waves of covid-19.
Fonterra could only focus on what it could control – staying on strategy, being agile and drawing on its strengths across the supply chain to manage and adapt to changes around the globe.
Hurrell says the most important financial achievement of last year was the $1.1 billion reduction in debt.
The balance sheet was in a much healthier state and the debt ratio target had been achieved.
“But perhaps most importantly because we made good inroads in the first half of the year, we were able to focus on our covid-19 response, delivering on our strategy and continuing to get your milk to market, he said.
“The $1.1bn debt reduction meant we weren’t drawn away from what needed to be done to manage the challenges we faced.”
Subsequently, agreement had been reached to sell China Farms for $555 million and this would allow further priority to be placed on NZ milk and more debt to be retired.