Latest / The SME Stream / The Country 04/12/25: Miles Hurrell talks to Jamie Mackay

Transcript

The Country 04/12/25: Miles Hurrell talks to Jamie Mackay · The SME Stream

• 0:00
  Speaker 1: This morning, Fonterra released Quarterly one or Q one business update.
• 0:05
  Speaker 1: It was a bit hum rarely, to be perfectly honest,
• 0:07
  Speaker 1: because Miles Hurrell, chief Executive, all the thunder of this
• 0:11
  Speaker 1: announcement was stolen last week when you announced the drop
• 0:14
  Speaker 1: and the forecast milk price to a midpoint of nine
• 0:17
  Speaker 1: point fifty or am I being a bit unkind?
• 0:21
  Speaker 2: Good Jamie, look, And I wouldn't say unkind, but you're right.
• 0:23
  Speaker 2: We did come out last week with a forecast change
• 0:26
  Speaker 2: on our milk price and that was a reflection of
• 0:28
  Speaker 2: you know that the outlook the sentiment obviously turned quite
• 0:31
  Speaker 2: significantly from where we started the season, and we felt
• 0:34
  Speaker 2: it was important to come out and talk to our
• 0:36
  Speaker 2: farmers as soon as we got sites of that. But yeah,
• 0:40
  Speaker 2: there are two parts of business. Clearly, we've gone after
• 0:42
  Speaker 2: a strong milk price the best we can in the
• 0:44
  Speaker 2: global market, but at the same time we then got
• 0:47
  Speaker 2: to turn and earnings on top of that. So what
• 0:49
  Speaker 2: we're put out today so that we've got off to
• 0:51
  Speaker 2: a pretty good start for the quarter.
• 0:53
  Speaker 1: Well, since that announcement last week, we've had another negative
• 0:57
  Speaker 1: down four percent GDT auction. Is that nine fifty under threat?
• 1:01
  Speaker 1: And I know you won't answer this, but I'm going
• 1:03
  Speaker 1: to put words into your mouth.
• 1:04
  Speaker 3: Yes it is. Well.
• 1:06
  Speaker 2: Look, when we came out last week, which was a
• 1:09
  Speaker 2: week or so ahead of when we expected, we'd planned
• 1:11
  Speaker 2: today's announcement to talk about milk price as well because
• 1:14
  Speaker 2: the market.
• 1:15
  Speaker 3: Had moved off a little bit.
• 1:17
  Speaker 2: But when it came out of that last pulse, we thought, no,
• 1:20
  Speaker 2: we've got to get ahead of it. The futures were
• 1:21
  Speaker 2: signaling even further drop, which we saw play out last night.
• 1:24
  Speaker 2: So we baked in a further drop last night or
• 1:27
  Speaker 2: the night before last rather and so that's certainly in
• 1:31
  Speaker 2: our nine fifty, but we obviously got to watch it closely.
• 1:33
  Speaker 2: There's a lot of milk in the international market. You know,
• 1:36
  Speaker 2: what we're seen play out here in New Zealand on
• 1:38
  Speaker 2: the back of these high milk prices relatively good weather
• 1:41
  Speaker 2: conditions is exactly what we're seen play out in the
• 1:43
  Speaker 2: northern Hembssy and some of those big producing regions with
• 1:46
  Speaker 2: the France and Germany and the Netherlands, and of course
• 1:49
  Speaker 2: in North America. A lot more milk, a lot more cows,
• 1:52
  Speaker 2: and as a result, you're seen down.
• 1:54
  Speaker 3: With pressure on price.
• 1:55
  Speaker 2: So not ideal as we sit there from a farmer's perspective,
• 1:57
  Speaker 2: but you know, still nine to fifty who back through history,
• 2:00
  Speaker 2: still not too bad.
• 2:01
  Speaker 1: Yeah, it's the old supply and demand story economics. One one.
• 2:04
  Speaker 1: Do you think that farmers might be less tempted now
• 2:08
  Speaker 1: to poke in supplements because obviously at ten bucks, as
• 2:11
  Speaker 1: i'd say with my layman's terms, poke it in one end,
• 2:14
  Speaker 1: it comes out the other. It's just a mathematical equation.
• 2:17
  Speaker 1: It pays to do it, it may not pay to
• 2:19
  Speaker 1: do it at nine dollars.
• 2:21
  Speaker 3: Yeah.
• 2:22
  Speaker 2: Well, well, of course, you know farmers will make their
• 2:23
  Speaker 2: own calls. But I guess that that also played into
• 2:25
  Speaker 2: our decision last week to come early on that announcement,
• 2:28
  Speaker 2: is that you know, farmers will be making decisions every
• 2:30
  Speaker 2: day now as to what their feed pedents look like
• 2:32
  Speaker 2: for the first and second quarter next year. And of
• 2:35
  Speaker 2: course you win to grazing and starts to be thought
• 2:36
  Speaker 2: about shortly. So all of those things played into it.
• 2:39
  Speaker 2: Let's get the information as soon as we've got it
• 2:41
  Speaker 2: out to farmers and they can make the right calls.
• 2:44
  Speaker 2: As I say, they'll all do their own analysis and
• 2:47
  Speaker 2: move forward. But there has been a bit more supplementary
• 2:49
  Speaker 2: feed put in the cows to date, so maybe that'll
• 2:52
  Speaker 2: turn around, as you say, and then as milk contracts
• 2:55
  Speaker 2: here in New Zealand and elsewhere in the world will
• 2:57
  Speaker 2: see that equilibrium come back into play.
• 2:59
  Speaker 1: The big number was announced last week. As we said,
• 3:02
  Speaker 1: from these numbers released today, what are the big ones,
• 3:05
  Speaker 1: what are the relevant ones, what are the exciting ones?
• 3:08
  Speaker 2: Well, of course we've broken into two here. We've got
• 3:11
  Speaker 2: so what we call continuing operations, which is sort of
• 3:13
  Speaker 2: the Fontier of the future, if you can call it that,
• 3:15
  Speaker 2: and then what we call discontinued operations, So that's the
• 3:18
  Speaker 2: mainland business.
• 3:18
  Speaker 3: So we've broken those two out.
• 3:20
  Speaker 2: The business of the go forward is pretty much in
• 3:23
  Speaker 2: line with last year, and the mainland business that's been
• 3:26
  Speaker 2: sold off, subject to all the regultary pieces that have
• 3:28
  Speaker 2: got to go through. Of course, that was up slightly.
• 3:32
  Speaker 2: There was a bit of a tail wind on imagery
• 3:34
  Speaker 2: revaluation in Australia, so we shouldn't get too excited with that,
• 3:36
  Speaker 2: but it is pleasing to see that mainland business actually
• 3:39
  Speaker 2: going forward positively as we get to the final stages
• 3:42
  Speaker 2: of that sales process, when are the.
• 3:45
  Speaker 1: Farmers going to get their two dollars per share capital
• 3:48
  Speaker 1: repayment in their hot little hands.
• 3:51
  Speaker 3: Yeah.
• 3:51
  Speaker 2: So you know, we've talked about some of the regulatory
• 3:54
  Speaker 2: approvals that needed. A big one of course this week
• 3:56
  Speaker 2: is that Luckily got io approval here in New Zealand.
• 4:00
  Speaker 1: That's despite the Deputy Prime Minister, former Deputy Prime Minister,
• 4:03
  Speaker 1: former MP for Towering or Winston jumping up and down
• 4:06
  Speaker 1: about foreign ownership.
• 4:08
  Speaker 3: Will He did make some comments, that's for sure.
• 4:09
  Speaker 2: But anyway, the process has run its course and they've
• 4:13
  Speaker 2: been given the green light. We've got similar processes to
• 4:16
  Speaker 2: take place and some of other jurisdictions, and then you've
• 4:18
  Speaker 2: got the I guess, the IT separation and the physical
• 4:21
  Speaker 2: office to take place. So all those things are well
• 4:25
  Speaker 2: in trained. So we found the first half twenty twenty
• 4:28
  Speaker 2: six is all. It will be completed and then cash
• 4:30
  Speaker 2: cash pretty quickly thereafter, subject to that final sort of
• 4:34
  Speaker 2: vote that needs to take place, but that's all just
• 4:36
  Speaker 2: a formality more or less.
• 4:37
  Speaker 1: Yeah, turkeys don't vote for an early Christmas. The farmers
• 4:40
  Speaker 1: are going to vote this through unanimously, you would think,
• 4:43
  Speaker 1: or almost so that vote is on the nineteenth of February.
• 4:46
  Speaker 1: As you said, it's a formality, and I know you're
• 4:49
  Speaker 1: talking first half of the calendar year. Are we April
• 4:52
  Speaker 1: or are we June.
• 4:54
  Speaker 2: Yeah, we'll look him in the pressures on for everyone
• 4:57
  Speaker 2: to get this moving. You know, the conversations I've with
• 5:00
  Speaker 2: lack Police even quite recently, is he he made the
• 5:02
  Speaker 2: sort of tongue in cheek comment that I spoilt his
• 5:04
  Speaker 2: summer in Europe by negotiating through through his summer holiday periods.
• 5:08
  Speaker 2: He he had a joke with men to well, I'll
• 5:10
  Speaker 2: spoil your summer, so let's let's keep moving on it.
• 5:12
  Speaker 3: So he wants the deal to go through. We want
• 5:14
  Speaker 3: the deal to go through.
• 5:15
  Speaker 2: So we just put a stake in the ground and
• 5:17
  Speaker 2: said first half because there is quite a lot of
• 5:19
  Speaker 2: complexity to undertake, but we'll work hard at that and
• 5:23
  Speaker 2: see you see how that plays out.
• 5:24
  Speaker 1: One other thing to come out of this Q one
• 5:27
  Speaker 1: business update was the amount of investment, the money you're
• 5:30
  Speaker 1: spending around the country on your sites.
• 5:33
  Speaker 2: Yeah, and look we came out I think it was
• 5:36
  Speaker 2: at the year end results and said by if twenty
• 5:38
  Speaker 2: eight we're going to be back to the same level
• 5:41
  Speaker 2: of earnings without the mainland business. And so that's you know,
• 5:44
  Speaker 2: that's quite a bold statement for us to make. But
• 5:47
  Speaker 2: a lot of that comes back to you know, growing,
• 5:49
  Speaker 2: growing our businesses we've got today. So you know, we've
• 5:51
  Speaker 2: got to invest in new uht in advanced protein products
• 5:56
  Speaker 2: in this buttafactory. So we've got to invest in those
• 5:58
  Speaker 2: to to be able to grow. Can't just become static.
• 6:01
  Speaker 2: So that's what that's investment's all about. We're excited about
• 6:03
  Speaker 2: that because there's say, the stake in the ground for
• 6:06
  Speaker 2: us is get back to those same earning levels within
• 6:09
  Speaker 2: three years of the investment, So that's what we're going
• 6:11
  Speaker 2: for and feeling feeling good about that.
• 6:13
  Speaker 1: Have you got a feeling that we're that that does
• 6:15
  Speaker 1: gdt auction thing? Hate to come back to the milk price,
• 6:18
  Speaker 1: but it's important. Where's the floor?
• 6:22
  Speaker 2: Yeah, that's that's the interesting question, right is you know,
• 6:24
  Speaker 2: having spent a lot of my career in the markets,
• 6:27
  Speaker 2: you know, buyer buyers are an interesting, interesting bunch, and
• 6:31
  Speaker 2: of course they're all trying to pick pick the bottom.
• 6:33
  Speaker 2: The inventories in it and most of our buyers are
• 6:35
  Speaker 2: globally are actually relatively low, which is a good thing.
• 6:38
  Speaker 2: And what that suggests to me is that they're all
• 6:40
  Speaker 2: sitting there waiting for the market to bottom out. They'll
• 6:43
  Speaker 2: all then jump in and refill their supply chains. But
• 6:46
  Speaker 2: you know who knows when that will be.
• 6:48
  Speaker 3: But you can't.
• 6:49
  Speaker 2: You can't if you've got if you've got a strong
• 6:50
  Speaker 2: brand and one of your key markets that you know,
• 6:53
  Speaker 2: the worst thing a procurement manager needs to do is
• 6:56
  Speaker 2: to run new supply chain empty and not have product
• 6:58
  Speaker 2: on the shelf. So that's the trade off of the
• 7:00
  Speaker 2: balance that they'll be watching. But we need to do
• 7:03
  Speaker 2: watch it closely. There is a lot of milkers, i say,
• 7:05
  Speaker 2: floating around the Norman hemisphere in particular, so we need
• 7:08
  Speaker 2: to see that play its way through. We'll watch closely
• 7:10
  Speaker 2: and our first people to hear about will be our
• 7:12
  Speaker 2: farmers if we need to make any changes.
• 7:14
  Speaker 1: Miles Harrel, Chief executive of Fonterra, thank you very much
• 7:18
  Speaker 1: for telling us all about that Q one business update.
• 7:20
  Speaker 3: Always good to chat. Good on you. Thanks Jami,