Kiwi dairy producer, Fonterra Shareholders’ Fund (ASX: FSF), shares are unchanged this morning despite the company announcing a solid first quarter update. At the time of writing, the Fonterra share price is trading at $4.11 after closing yesterday’s session at the same level.
What was announced by Fonterra?
The Fonterra Shareholders’ Fund is a managed investment scheme that allows shareholders to invest in the performance of the Fonterra Co-operative Group, which is listed in New Zealand.
The company says the co-operative has continued to make progress on implementing its strategy and had a solid start to the first quarter. It delivered normalised earnings before interest and tax (EBIT) of NZD$250 million, up NZD$72 million on last year.
Fonterra advised it has seen improvements right across its business, with a couple of exceptions. These were Europe, which has been impacted by higher costs, and Africa, which has been impacted by lower volumes after which the company shifted its products to meet the strong demand across Asia.
The company also reported that its Greater China Foodservice business has been the stand-out performer so far, as demand for dairy in China continues to recover strongly from COVID-19. Fonterra expects to expand its foodservice business into another 13 cities in China, bringing the total number of cities it operates in to more than 360.
Fonterra says demand in its Southeast Asia (SEA) consumer business has also improved year on year. Meanwhile the company’s SEA foodservice business has started to recover as COVID-19 restrictions eased in some markets.
According to Fonterra, it will continue to divest non-core assets after announcing it will sell its China Farms for NZD$555 million, which will further reduce debt.
How has the Fonterra share price performed in 2020?
In September, Fonterra reported a full year net profit after tax of NZ$659 million for FY20, up by NZ$1.3 billion compared to the prior year.
At the time, the company said its underlying business performance had improved, with Fonterra’s foodservice business having a significantly better first half, especially in Greater China. However, this improved performance was partially offset by the disruption caused by COVID-19.
The Fonterra share price has risen by 8.16% in 2020, after falling by up to 15% in May. At the current Fonterra share price, the company commands a market capitalisation of $437 million.
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