When declaring an $834 million net profit for 2015-16 he said the co-op had stayed on strategy, strengthened the balance sheet and used that strength to deliver as much support as possible to its 10,500 shareholders in very difficult times.
The result was 51 cents per share (cps) earnings or net profit, of which 40c was paid as dividend, working capital savings were used to reduce debt by $1.6 billion to a gearing ratio of 44.3% and return on capital was a record 12.4%.
But there was no arguing, the season had been incredibly difficult for farmers, their families and rural communities with global dairy prices unsustainably low.
“We stayed with the significant and necessary changes begun three years ago … and worked hard to return every possible cent of value back to our farmers.
“After a period of deliberate and disciplined attention to the business we have become a stronger co-operative operationally, financially and in our mindset,” he said.
Since 2013, when Wilson and chief executive Theo Spierings were new to their roles, the strategy had been reset to accelerate more milk volume into higher-value dairy products.
But the noise of price volatility had obscured the fundamental improvements being made to the business in terms of cost reduction, culture change, product innovation and processing capability.
“Hopefully, farmers can now see what has been done and how it has positioned their co-operative for a successful future.”
The headline numbers from FY16 were all very well but now they had to be improved on in a rising dairy market, Wilson said.
“The business is in good health but we have to deliver better numbers this year and the year after and so on.
Twice in the annual results presentation Spierings, who must be a motor racing fan, claimed Fonterra was now in the pole position in the race against its competitors.
He claimed that status for the restructured and now profitable Fonterra Australia division and for the co-operative as a whole in comparison to the peers it respected and co-operated with around the dairy world.
Until the Stanhope cheese plant was rebuilt, Australia would not make an acceptable return on capital but it had delivered earnings of $63m compared with a $92m loss the year before.
The Darnum joint venture on infant formula with Beingmate had been approved and the plant was filling up.
The strength of the NZ dollar was a significant headwind, an adverse $1/kg MS from beginning to end of the past year, but the returns paid to New Zealand farmers had overtaken Europe and were gaining on the US.
Wilson said underlying improvements in processing efficiency had been reflected in structural improvements to the milk price.
If the milk price model had not been adjusted accordingly since 2009, last year’s payout would have been split $3.54/kg MS farmgate milk price and 87cps earnings.
That represented $650m more in the milk price distributed to farmers.
Another 5c was to be transferred to milk price this season, which made the earnings guidance 55c to 65c without the adjustment.
“So, Fonterra is forecasting a significant step up again in the year ahead.
“Our forecast is based on rising commodity prices so (we need to) maintain gross margins, plant efficiencies and new products for new earnings.
“Fonterra’s people do an outstanding job of selling NZ ingredients for premium prices in a world that has been awash with dairy commodities.”
