Fonterra aiming to be the number one player in the Chinese dairy market

Fonterra aims to become the number one dairy player in the Chinese market, according to its CEO, Theo Spierings.

Speaking at its 2015 Annual Meeting which was held today (November 25), he said that the company plans to grow its Chinese exports to $10 billion which represents growth of approximately 50%.

According to Spierings, the targeted growth will be focused on the ingredients, consumer and food service markets.

He also said that Asia is becoming the largest trading nation in the world, but the Chinese market will undergo considerable change as a result of a changing demographic.

This change will result in a dramatic increase in the number of Chinese people aged over 65, with this age bracket set to grow by 200m by 2020, he said.

He added the approximately 400-500m people in China will move into the middle class which will be beneficial for the demand for high-quality fresh milk products and in turn Fonterra.

Performance of Fonterra in 2015

Trading conditions in 2015 have been turbulent as a result of turmoil in the Middle East, Russian embargoes and supply and demand imbalances which have caused low milk prices, said Spierings.

According to Spierings, Fonterra has maintained its strategy of moving more volume to higher value markets while also maximising the gross margin achieved.

Fonterra’s Response to a turbulent dairy market

  • Stay on strategy – gain momentum
  • Move volume to higher value
  • Maximise gross margin
  • Strong cost focus
  • Maximise cash
  • Invest for the future
  • Financial discipline

As a result of the turbulence in the dairy markets, he added that Fonterra’s total revenue has dropped by 15% and currently sits at $18.8 billion New Zealand dollars.

Despite this fall in revenue, the net profit after tax has increased by 183% to reach $506m New Zealand dollars, said Spierings.

This increase in net profit comes as the coop moves more product into higher value markets while the volumes being processed have also increased by 9% to sit at 4.3m tonne.

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