Fonterra bullish on dairy future

Henry van der Heyden, chairman of New Zealand dairy giant Fonterra, was distinctly upbeat at this year’s meeting in London. In an interview with Dairy Industries International, he notes that the firm is both building for the long-term in its home base, with a new NZ$200m (EUR111.9m) plant planned for the south island in Darfield, and looking abroad to Asia for future profits. “It’s a growing business, with exports from New Zealand to China and other Asian countries becoming quite important markets. We have seen a steep increase in WMP sales to Asian countries. Four or five years ago, we were exporting 60,000 tonnes per year to China – now it’s around 180,000 tonnes,” he points out.

However, not all export markets are growing for the dairy cooperative. “Product into the EU is in decline,” van der Heyden admits. “Better opportunities for our are products are elsewhere. China, Indonesia, the Philippines and Malaysia, as well as the Middle East and north Africa, are all good growth areas.”

Fonterra for its part is positive about the market, and he notes that he thinks the European Union is also beginning to see that a focus on markets, rather than political solutions, may be the answer for dairy volatility.

On the consumer side, he reports that Australia has a very good consumer products business for Fonterra. “We’re seeing very good growth, particularly in cheese. In yogurt, we have the Ski brand that we purchased from National Foods, with very nice growth.” However, he notes that Australian milk production continues to suffer from the drought, with production falling to nine million litres from 12 million litres a few years ago.

Meanwhile, New Zealand continues to see growth of two to three per cent a year in milk production. “In the medium-term, I predict it will keep growing at the same rate,” he says. The Fonterra board was also “humbled” by the farmers’ vote of confidence in them by voting for the share-trading plan, where farmers can share trading among themselves to ease a major risk to Fonterra balance sheet and provide permanent capital for growth, he concluded. “We have a strong mandate for the board, and it’s the most positive sign since Fonterra was formed.”