Consumer NZ – New Zealanders now trust the supermarkets less than the banking industry

Source: Consumer NZ

New nationally representative research from Consumer NZ has found sentiment in the supermarket industry has taken a sharp hit over the past year, with trust plummeting.

In June last year, 17% of New Zealanders said they did not trust the supermarkets. Today that has nearly doubled, jumping to 32% of the population. Of the 15 industries measured, supermarkets have seen the most significant decline in trust since June 2021.

“It's particularly concerning that consumer trust in a sector that is essential to our well-being as a nation, and is virtually impossible for consumers to do without, is seeing such a marked decline,” said Jon Duffy, Consumer NZ chief executive.

“The Commerce Commission’s study into the grocery sector found the duopoly is consistently making profits in excess of what it should,” he said. “Couple that with cost-of-living challenges, and no wonder there has been an erosion of trust in the supermarket industry.”

Consumer is calling for measures to increase competition in the supermarket sector and has launched a petition to #stopthesuperprofits. The petition asks the Minister of Commerce and Consumer Affairs, David Clark, to go further than the commission’s recommendations and bring about meaningful change in the sector. To date, 74,000 New Zealanders have signed the petition, and we’re aiming for 200,000 signatures.

“The supermarkets have recently introduced measures to temporarily address high prices,” Duffy said.

“Countdown has put a temporary price freeze on 500 items over winter ‘in response to the cost of living’ and Foodstuffs has returned prices on more than 110 everyday items, to 2021 levels.

“Some of this activity will be helpful for struggling consumers, however we don’t think the supermarket giants should be applauded for their efforts. We should be asking how a lack of competition has been allowed to create this situation in the first place.”

Food prices were 6.4% higher in April 2022 compared with April 2021. Consumer’s research found that New Zealanders are preparing themselves to spend more on groceries. In June 2021; a quarter (24%) expected their groceries to increase. By April 2022, more than two in five (43%) anticipated an uptick in grocery expenditure.

Concern about the price of food has jumped significantly. Groceries went from the eighth biggest financial concern in June 2021 to third in April 2022, beaten only by rent and mortgage payments.

Consumer NZ has also noted that in the last year New Zealanders are incurring an increasing proportion of debt on essential items like groceries, fuel and bills.
 
About Consumer

Consumer NZ is a non-profit organisation, with 60 years of helping New Zealanders get a fairer deal. In addition to our product tests, we investigate consumer issues and campaign to improve consumer rights. We don't take advertising. Our work is mainly funded by our members and supporters.

Budget 2022: Cautious steps in the right direction but real test will be impact at the grassroots – Caritas

Source: Caritas

“We welcome the $1billion cost of living package that will assist low-income families who are increasingly faced with the effects of rising inflation.  The extension of the half price public transport subsidy and the permanent subsidy for Community Service Card holders will also provide help to people who rely on public transport with the additional benefit of reducing carbon emissions” says Caritas Engagement Manager, Roger Ellis.

“The additional funds for affordable housing will help more low-income people to gain access to housing but we are still a long way from having enough warm dry homes to house all our people.   The overdue investment of $11billion into the public health system will increase capacity for the provision of health services at a time when the health sector is severely stretched and understaffed,” said Roger Ellis.

“We also support the greater provision through the $580million package across Māori and Pacific health, social and justice sectors which we hope, if used effectively, will begin to address some of the entrenched inequities in our country.”

However, Caritas has some concerns about the growing trend towards centralisation of power away from communities towards central government agencies.

“'Decisions need to be made at the most appropriate level, informed by what is happening in communities. For example, the move to consolidate District Health Boards into a centralised health agency runs the risk of distancing decision-making away from local communities,” said Roger Ellis.

“Governments can spend billions of dollars on various social issues. But if this spending does not translate into meaningful change at the local community level, then questions need to be asked about its effectiveness. The real test of this budget will be the extent of positive impact at the grassroots for those who, this winter, lack decent housing, who struggle to pay for the groceries, the power and the rent” said Roger Ellis. 

Caritas Aotearoa New Zealand is the New Zealand Catholic Bishops' agency for justice, peace and development, and incorporates Catholic Volunteers Overseas. We are working for a world free of poverty and injustice through community development, advocacy, education, and emergency relief. Caritas Aotearoa New Zealand is a member of Caritas Internationalis, a confederation of 165 Catholic aid, development and social justice agencies active in over 200 countries and territories. 

Housing Market – Higher OCR will keep the pressure on the housing market – CoreLogic

Source: CoreLogic – Commentary by Kelvin Davidson, Chief Property Economist, CoreLogic NZ

After the knife-edge decision in April about whether to raise the official cash rate (OCR) by 0.25% or 0.5%, today’s decision was clearer cut. The 0.5% increase that was duly delivered took the OCR back to 2%, a level not seen since November 2016, prior to the decision on the 10th of that month to lower it to 1.75%.

Clearly, with inflation still high and unemployment very low, there were no barriers to raising the OCR again today, and now attention will quickly shift to what’s next. On that note, the Reserve Bank actually indicated a higher and earlier peak for the OCR than previously envisaged – now perhaps 4% or so by mid-2023, rather than about 3.5% by late 2023.

For the housing market, the implications are clear – we’re not yet at the end of this rising cycle for mortgage rates, and that will keep a degree of downwards pressure on property values, especially since about 50% of loans are currently fixed and are yet to face the true costs of higher rates. But that day of reckoning will happen within the next 12 months. For the record, the RBNZ has indicated that house prices might drop by about 12% from peak to trough.

Granted, we’re probably closer to the end for this phase of rising mortgage rates than the start, given that the increases to date have been larger/faster than what’s actually happened to the OCR so far. But that may not be much comfort for new buyers now looking at mortgage rates of at least 4.5-5%, and heading higher, or existing borrowers who are rolling off rates as low as 2-2.5% from 12-18 months ago.

However, it’s not only the cost of debt that is a factor; it’s also the reduced availability. Sure, official debt to income (DTI) ratio caps have been delayed. But banks are probably enforcing their own DTI limits to some degree anyway, while loan to value ratio rules are still biting pretty hard too, and pre-approvals for low deposit loans are reportedly very difficult to obtain. On top of all of that, the serviceability test rates are another barrier, now generally sitting at 7% or above.

Ultimately, growing fears about a recession may mean the OCR settles at a lower level than currently projected by the Reserve Bank. And a continued low unemployment rate should help to insulate the property market from major downturn to some degree. But it’s still looking likely that the current correction for property values isn’t over yet.

About CoreLogic NZ:

CoreLogic NZ is a leading, independent provider of property data and analytics. We help people build better lives by providing rich, up-to-the-minute property insights that inform the very best property decisions. Formed in 2014 following the merger of two companies that had strong foundations in New Zealand’s property industry – Terralink Ltd and PropertyIQ NZ Ltd – we have the most comprehensive property database with coverage of 99% of the NZ property market and more than 500 million decision points in our database.

We provide services across a wide range of industries, including Banking & Finance, Real Estate, Government, Insurance and Construction. Our diverse, innovative solutions help our clients identify and manage growth opportunities, improve performance and mitigate risk. We also operate consumer-facing portal propertyvalue.co.nz – providing important insights for people looking to buy or sell their home or investment property. We are a wholly owned subsidiary of CoreLogic, Inc – one of the largest data and analytics companies in the world with offices in New Zealand, Australia, the United States and United Kingdom.  For more information visit corelogic.co.nz.

NZUS Council – Confirmed White House Visit Big Boost For NZ-US relations

Source: NZUS Council

Confirmation that Prime Minister Jacinda Ardern will meet President Joe Biden next week on Tuesday is a big boost for NZ-US relations and Kiwi exporters, says NZUS Council Executive Director Jordan Small.
White House visits are rare events. This will be only the third such formal invitation a New Zealand Prime Minister has received in the past 20 years, and the 26th in our history.
“Make no mistake, this is a big deal and a continuation of the positive trend in our relationship. History shows that gaining an audience with the US President can open up new opportunities to cooperate internationally and enhance trade,” Jordan Small says.
“As it stands the New Zealand Government and the Biden Administration already have common ground on a range of current issues including foreign investment rules, IP waivers for vaccines and the need for globally aligned action on climate change. The New Zealand experience of gun reform will also be a discussion topic.”
The visit is also an opportunity to continue the push for the US to revisit its broader trade strategy in the region and address some of the current challenges that New Zealand companies experience when looking to enter or expand in the US market.
“While US accession to the CPTPP seems to be off the table for the moment, it is still the best way to achieve mutual economic benefits and we should continue to promote it at every opportunity. The Indo Pacific Economic Framework (IPEF) that the US Administration has been advocating for is not of the same standard as a fulsome trade agreement, which remains our ideal outcome,” Jordan Small says.
“But it’s worth noting we have built up a diverse and exciting trade relationship without an FTA. Kiwi exporters are increasingly delivering high value exports to the US, as shown in the latest stocktake on our trade relationship. Prior to Covid hitting, our services exports were worth over $1 billion more than agricultural products sold to the US – a major shift in our traditional export profile.
“So while we are doing well, the Prime Minister’s visit can bring issues such as work visa conditions for New Zealand businesses into sharper focus and help make it easier for them to operate in the US. 
“The profile of her visit has also generated some much-needed interest in our tourism and education offerings that have been decimated by Covid.
“We know that in-person engagement is really important in the US, so the Prime Minister’s visit is a massive opportunity for New Zealand organisations and exporters to leverage off and we’re excited to see what opportunities will flow from it.”

Animal Welfare – Government investment in plant-based food company a step in the right direction

Source: SAFE For Animals

The Government announced on Tuesday that Sustainable Foods Ltd, which produces the plant-based food brand ‘plan-t’, will receive Government backing with a $1.25 million loan from the Regional Strategic Partnership Fund.
SAFE CEO Debra Ashton welcomes the move and said the Government should make more investments in the plant-based food sector.
“This sector has extraordinary potential for Aotearoa, but we risk being left behind by international markets who are making significant investments into plant-based food,” said Ashton.
“This investment is a small step in the right direction. We’d like to see the Government back more businesses who are bringing plant-based products to the market. It’s better for the animals and the environment.”
Last year, $5 billion worth of investment flowed into the global vegan food market. By 2030 the plant-based protein market could reach $162 billion.
In April the Intergovernmental Panel on Climate Change (IPCC) stated that a switch to plant-based diets is one of the most effective demand-side measures to reduce greenhouse gas emissions.
SAFE’s recently launched ‘Done with Dairy’ campaign has called out the dairy industry for being the largest emitter of greenhouse gases in Aotearoa. The campaign is calling on the Government to urgently create a plan of action to support farmers to transition out of the sector.
“Aotearoa needs to urgently implement policies that shifts our economy towards sustainable plant-based agriculture and we call on them to make that happen.”
SAFE is Aotearoas’s leading animal rights organisation.
We're creating a future that ensures the rights of animals are respected. Our core work empowers society to make kinder choices for ourselves, animals and our planet.

New international partnership puts communities and smart grids at the heart of net zero

Source: WEL Networks

Today marks the official launch of an international knowledge-sharing partnership of distribution network operators and community energy enterprises and organisations, convened by the University of Oxford and its Research Partner Enel Foundation and supported by the co-founders Ausgrid, Scottish and Southern Electricity Networks and Low Carbon Hub. First introduced at COP26, the International Community for Local Smart Grids (ICLSG) will undertake ground-breaking research that will be informed by the learnings and expertise of the partners.
Climate change is an international challenge that demands local solutions. The partners announced today are drawn from Great Britain, Italy, Japan, New Zealand and Australia and are committed to securing a fair, cost-effective transition to net zero. To achieve that, the ICLSG believes that the relationship between communities and smart grids must be championed.
For electricity distribution network operators, the net zero transition means supporting the electrification of vehicles and heating, plus new requirements for homes and businesses who may wish to generate electricity. Networks must be smart and adapt at unprecedented speeds to the new requirements for powering their communities, while ensuring a ‘just transition’ for their customers.
Community energy organisations are rooted in their communities’ priorities for net zero and are working to ensure their solutions work socially, environmentally and financially. They provide a vital bridge to foster understanding of the opportunities and challenges that a transition to a zero-carbon energy system raises.
There are local energy projects happening all over the world. It is essential that we document and share these learnings to pave the way for more projects to come. By working together to find real world, collaborative solutions that address the specific needs of different communities across the globe, we hope to unlock the mass participation that is required to galvanise a successful transition.
The combination of expertise that partners bring will be enhanced and developed by a five-year research programme, that will explore how smart grids can support net zero technologies in a way that is good for people and good for the planet.
The partnership has recently appointed engineer Dr Katherine Collett as Senior Researcher. She brings expertise from previous projects on vehicle-to-grid, forecasting electric vehicle uptake, readiness for grid edge technologies, and decarbonising public transport in Sub-Saharan Africa.
Professor Malcolm McCulloch who will be leading the research and who is Head of the Energy and Power Group, part of the Department of Engineering Science at the University of Oxford, said:
“From Oxford to Waikato and from Sydney to Tokyo, the climates and regulatory structures within which electricity distribution networks and communities operate may be very different, but all our partners are tackling the same problems of how to innovate and cooperate as the world turns to zero carbon technologies.
“Our research will draw in learnings from partners’ smart grid and community trials and will identify and develop the tools needed to deliver a just transition to net zero.”
As New Zealand’s industry partner representative, Waikato-based electricity distributor WEL Networks Chief Executive Garth Dibley said:
“The electricity industry is heading into a period of unprecedented change driven largely by the necessity to meet international carbon reduction requirements to ensure reasonable outcomes for the environment. We are looking forward to working with the ICLSG to collaboratively find innovative ways to provide a strong, safe, efficient and reliable supply of electricity as we continue to support New Zealand’s Net Zero goal of becoming 100% renewable by 2030.”
Briony O’Shea, Chair of the Citizens Own Renewable Energy Network Australia, said:
“The Citizens Own Renewable Energy Network Australia is looking forward to participating in this partnership which will allow us to contribute to research priorities and learn from community energy groups and network operators around the world. This will be of great value to our local renewable energy and energy efficiency projects.”
TEPCO Power Grid President Yoshinori Kaneko said:
“We are excited to be part of the international partnership among network operators to share Japanese experiences and learn from best practices around the world to achieve carbon neutrality and strengthen the resilience of power grids to better serve our customers.”

Northland – Young leader recognised at national awards

Source: Northland Regional Council

Northland Regional Council (NRC) Marketing and Engagement Manager, Natasha Stubbing, has co-won the coveted Taituarā Local Government Professionals Aotearoa Emerging Leader Award.
The award, which was shared between two nominees, recognises an emerging leader, aged 35 or under, who has a proven track record of designing or delivering innovative and successful programmes, projects, processes or practices with an identifiable community impact.
Taituarā is a national membership organisation for local government professionals.
As her prize, Natasha will travel to the International City Managers’ Association (ICMA) 2022 Annual Conference in Columbus, Ohio in September this year. The ICMA is the leading association for local government professionals in the world with more than 13,000 members.
“It’s amazing to get an award like this for doing a job that you love and I’m looking forward to gaining international experience at the conference which I can then bring back and use in the mahi we do here in Te Taitokerau,” Natasha says.
In making the award, the judges said they were impressed by Natasha’s commitment to working with her community to increase engagement, particularly in democratic participation across the diverse communities within Te Taitokerau.
Council Chair Penny Smart says Natasha has been with NRC for close to 10 years, and over that time has added huge value to the organisation and to the communities of Te Taitokerau.
“Natasha has shown outstanding commitment and passion for her role at NRC and is very deserving of the award. The Northland Regional Council is very proud to have her within our organisation as an emerging leader in Te Taitokerau.” 

Awards – Finalists Announced for Mindful Money Ethical and Impact Investment Awards

Source: Mindful Money

Finalists Announced for Mindful Money Ethical and Impact Investment Awards: Celebrating leaders in the transition towards ethical investment

The ethical and responsible revolution continues to accelerate internationally and in New Zealand. There is growing consumer demand for investment that seeks to avoid harm and improve social and environmental outcomes, and investment providers are responding. The extent of the innovation and deepening of this movement is evident in the second annual awards.

Mindful Money’s Founder and CEO, Barry Coates commented: “This year, there are more entries, demonstrating higher standards, and extending the range of consumer options. Ethical and responsible investment has become the norm for investment management in New Zealand and the entries to this year’s awards show significant progress in raising the bar.”

“The investment sector is moving quickly, with a leap in standards in the EU and across the globe. We need to accelerate progress in New Zealand if we are to seize the opportunity to become world class, drawing in capital and using it to accelerate the transition towards sustainability and zero climate emissions.”

There were 53 entries in 8 different award categories, judged by 32 independent experts. The judging process has been rigorous and achieved consensus in each category, selecting a strong field of finalists.

Best Ethical KiwiSaver Provider

The judges were looking for the fund that provided the best outcomes across the main strategies of avoiding harm, improving investment social and environmental performance and investing for positive impact. They welcomed a strong field of entries. As KiwiSaver funding closes in on $100 billion in total, it has attracted new entrants and new approaches. KiwiSaver investors are now presented with options of around 330 funds from over 40 providers. Amongst these, the finalists in the awards (in alphabetical order) are:

Kiwi Wealth

Medical Assurance Society (MAS)

Mercer

Pathfinder Asset Management

 

Best Ethical Retail Investment Provider

The judges were looking for the providers able to show evidence of ethical performance in their investments and engagement with companies in their portfolios. The judges were impressed with the degree to which the entries this year have deepened their ethical practices and increased their investment in companies that have a positive impact. Retail investment products amount to around $70 billion invested in around 425 funds from 50 providers. Of these, the finalists are:

Harbour Asset Management

Macquarie

Pathfinder Asset Management

Simplicity

TAHITO Te Tai o Rehua

Best New Ethical Fund

The judges were looking for innovation in a fund launched over the past year. The large number of entries indicates the growth of ethical and impact investment in Aotearoa. While the judges welcomed the increased focus on funds investing in companies with a positive impact, the judges would have liked to have seen more evidence to substantiate ethical and impact claims. Overall, the entrants have demonstrated innovative approaches and are offering more options for retail investors. The finalists are:

Devon Global Impact Bond Fund

Devon Global Sustainability Fund

Harbour Sustainable Impact Fund

Russell Investments Sustainable Global Shares Fund

Best Impact Investment Fund

The judges were looking for an impact purpose, a rigorous framework for measurement and examples of tangible impact from entrants in this category. The strongest entries were those that were able to demonstrate a direct contribution to impact through their investment. Examples included climate solutions, affordable housing and contributions to community-level impact within Aotearoa. The finalists are:

Climate Venture Capital Fund

New Ground Capital/Homes for Tamariki

Purpose Capital Impact Fund

Te Puna Hapori/Brightlight

Best Net Zero and Climate Action Investor

The judges were impressed with the wider range of entries this year, signalling the growing commitment to climate action by investment funds. They looked for leadership in ambition and commitment, but also evidence of action and tangible results. Most entrants are still putting their plans in place and the judges look forward to seeing more evidence of outcomes in future years. The finalists are those with ambitious frameworks in place and tangible progress in emissions reductions:

BT/Westpac

Mercer

New Zealand Superannuation Fund

Best Ethical Overseas fund

The judges were looking for the overseas investment funds, actively marketed within New Zealand, which are able to demonstrate the best ethical investment outcomes. There was an exceptionally strong field of entries. The finalists showed a mature approach and analytical rigour in their policies and practices, raising the bar for domestic funds. They add depth and diversity to the range of New Zealand funds on offer. The finalists are:

Australian Ethical Australian Shares Fund

BetaShares Global Sustainability Leaders ETF

Mirova Global Sustainable Equity Fund

Pengana WHEB Sustainable Impact Fund

Best Ethical Financial Adviser

Financial advice is important, not only for financial performance but also for enabling clients to confidently invest ethically. While the financial advice sector has been slow to embrace ethical investing, there are some standout exceptions, including the finalists in this category. They have demonstrated the integration of ethical investment into their advice processes and set good practice standards for the sector. We are seeing growing interest in ethical financial advice, driven by client demand, and we look forward to many more entries into this category next year. The finalists are:

Ethical Investing Group

Money Matters

Rede Rutherford

Best Media Reporting on Ethical Investment

The judges were looking for excellence in coverage of ethical investment, resulting in greater awareness and deeper understanding. Financial literacy remains low in New Zealand and sustainable financial literacy is even lower. Education and engagement through the media are crucial and the judges would like to see many more entrants in future years. There were two particularly strong entries in this category, shortlisted as finalists:

John Berry with Stuff

Rob Stock with Stuff

Tickets to the Awards Ceremony

Over half the tickets have already sold, you can get tickets here: https://events.humanitix.com/mindful-money-awards-2022

Sponsors

Mindful Money has secured generous support for the conference, including Convergence Partners, Generate, Lifestages, Medical Assurance Society, Mercer, Milford Asset Management and Trustees Executors.

Mindful Money is also grateful for the support of AMP, ASB, Booster, Macquarie, Money Works and Pathfinder as sponsors, and to Good Returns as the media partner for the awards.

Fonterra provides 2022/23 opening forecast Farmgate Milk Price and update on business performance

Source: Fonterra

Fonterra today announced its 2022/23 opening forecast Farmgate Milk Price and provided an update on its third-quarter performance.

The opening forecast Farmgate Milk Price for the 2022/23 season is set at $8.25 – $9.75 per kgMS, with a midpoint of $9.00 per kgMS.

CEO Miles Hurrell says the strong opening forecast reflects continued demand for dairy coupled with constrained global supply.

“The long-term outlook for dairy remains positive, despite recent geopolitical and COVID-19 related events impacting global demand in the short-term.

“On the supply side, growth from key milk producing regions is expected to remain constrained as high feed, fertiliser and energy costs continue to impact production volumes.  

“These demand and supply dynamics are expected to support dairy prices in the medium to long-term.

“However, we are operating in an increasingly volatile global environment and are managing a wider range of risks than usual.

“This includes the potential for further impacts from COVID-19, financial markets and foreign exchange volatility, global inflationary pressures, a tightening labour market, increasing interest rates, geopolitical events, as well as the possible impact on demand from higher dairy prices.

“This is why our 2022/23 forecast range is so wide at this point in the season.”

For the 2021/22 season, Fonterra has maintained its 2021/22 forecast Farmgate Milk Price of $9.10 – $9.50 per kgMS.

“At a midpoint of $9.30 per kgMS, this would be the highest forecast milk price in the Co-op’s history and would see us contribute almost $14 billion into the New Zealand economy through milk price payments.”

Business performance

For the nine months ending 30 April 2022, Fonterra’s sales volumes were down as a result of lower milk collections and the timing of sales due to short-term impacts on demand including the lockdowns in China, the economic crisis in Sri Lanka and the Russia-Ukraine conflict.

Total Group normalised EBIT was $825 million, down $134 million reflecting lower sales volumes, continued pressure on margins from the significantly higher milk price, on-going COVID-19 disruptions, and the rapid decline of the Sri Lankan Rupee.

This was also reflected in Fonterra’s Normalised Profit After Tax of $472 million, down $115 million and reported Profit After Tax of $472 million, down $131 million.

Commenting on Fonterra’s performance, Mr Hurrell says despite significant market disruption, the Co-op continued to deliver a strong milk price and solid earnings.

“As an exporter, many of the markets we operate in have been prone to sudden shocks, which can impact what we sell, where we sell it and when, but right now we’re feeling the impact of multiple events across multiple markets.

“We are actively managing the challenges arising from COVID-19 and other geopolitical and macroeconomic events. However, increasing market volatility and uncertainty, on-going supply chain disruptions and growing inflationary pressures have added increased complexity.

“I want to thank our employees for delivering a solid financial performance despite the challenging global conditions, and also our farmer owners, sharemilkers and contract milkers who are managing increasing costs on-farm.

“AMENA continued to deliver a strong performance. Normalised EBIT was $406 million, up 30% due to improved gross margins in our Ingredients channel, and a strong performance from our Chilean business.

“In Greater China, Ingredients continued to benefit from increased sales of higher margin products. However, normalised EBIT was down 17% to $317 million, due to continued pressure on our margins from the higher milk price, particularly in Foodservice, as well as the COVID-19 lockdowns. We also expect the impact of the lockdowns to show up in our fourth quarter results.

“Aside from some supermarkets, all restaurants and other food outlets were closed in Shanghai in early April to contain the Omicron outbreak. While restrictions have started to ease, a number of food outlets remain closed, while other cities across China are facing COVID-19 restrictions. The impacts of this, and the disruptions to supply chains, have been felt across the market and is reflected in our Greater China sales volumes which are down on the same time last year.

“APAC’s normalised EBIT was down 43% to $177 million. While our Australian business and Ingredients channel continued to perform well, this was more than offset by the unprecedented economic challenges in Sri Lanka, margin pressure from the higher milk price and other COVID-19 related challenges.

“While historically a good business for us, the significant deterioration of economic conditions in Sri Lanka has seen the rapid devaluation of the Sri Lankan Rupee against the US dollar.

“This means it takes more Sri Lankan Rupee to pay for product purchased from New Zealand, which is sold in US dollars, and has resulted in an $81 million adverse revaluation of our Sri Lankan business payables owing to New Zealand. This has been reflected in our normalised EBIT, which may continue to vary as Sri Lanka’s currency fluctuates.”

Mr Hurrell says the Co-op’s focus on financial discipline has put it in a good position to manage the impacts of these recent events.  

“With over 95% of our milk contracted for the season, our strong balance sheet gives us the ability to hold higher inventory to manage the short-term impacts on demand and our sales profile.

“When combined with the increased value of our inventory, which is up due to the higher milk price, this has meant our working capital, and therefore debt, is higher than usual at this point in the season. We expect this to balance out over the course of the year.  

“Total Group operating expenses have increased, up 3% to $1,632 million mainly due to inflationary pressures and COVID-19 supply chain disruptions which have resulted in higher distribution and storage costs.”

Commenting on the rest of the year, Mr Hurrell says the Co-op is maintaining its forecast earnings guidance of 25-35 cents per share.

“While favourable price relativities in the fourth quarter are positive for earnings, we expect continued pressure on our margins due to the higher milk price coupled with the normal seasonal profile of our business.”

Progress on strategy  

Mr Hurrell says, despite facing additional challenges in the third quarter, the Co-op has continued to take steps towards its long-term strategy.

“Following the Government’s announcement that it would make the necessary legislative amendments to support our new Flexible Shareholding capital structure, the government consultation process is underway, and we expect the amendments to progress through Parliament this year.

“The Government’s aspirations for our industry are well aligned to the Co-op’s. We all want a high performing dairy industry, and a successful and innovative Fonterra is central to that.

“Fonterra and the Fonterra Co-operative Council are both making a submission to ensure the voice of the Co-op and its farmers are heard.

“We are continuing our ownership review of our Australian business and the divestment process for our Chilean business, Soprole, is underway. We’re taking our time to ensure the best outcomes for both businesses and remain confident on delivering on our intention to return around $1 billion of capital to our shareholders and unit holders by FY24.

“As part of our plan to grow our earnings by developing new innovative products and commercialising our IP, we launched Nurture in Singapore – a cultured milk beverage fortified with added vitamins and our probiotics, targeting the gut health market.

“We’ve also developed our thinking on the role our dairy expertise can play in addressing cognitive health for all ages. Consumers are becoming increasingly aware of the importance of mental health, and we have plans to launch new consumer products for improving cognition, sight and stress over the coming months.

“In sustainability, we have signaled our aspiration to be Net Zero by 2050, and we support the Government’s recently announced plan to reduce on-farm emissions through the new Centre for Climate Action on Agricultural Emissions.

“We believe methane is New Zealand’s greatest climate change challenge and finding a solution will be a game-changer. That’s why we recently announced we’re expanding the trial of methane-reducing seaweed as a supplementary feed for cows.

“Lab trials have shown the seaweed has significant potential to reduce emissions and, if on-farm trials are a success, our partnership with Sea Forest means our farmers will be at the front of the queue. This is just one of a number of initiatives we have underway in this area.

“We have also announced the trial of an electric milk tanker – the first of its kind in New Zealand.”

Non-GAAP financial information

Fonterra uses several non-GAAP measures when discussing financial performance. Non-GAAP measures are not defined or specified by NZ IFRS.

Management believes that these measures provide useful information as they provide valuable insight on the underlying performance of the business. They may be used internally to evaluate the underlying performance of business units and to analyse trends. These measures are not uniformly defined or utilised by all companies. Accordingly, these measures may not be comparable with similarly titled measures used by other companies. Non-GAAP financial measures should not be viewed in isolation nor considered as a substitute for measures reported in accordance with NZ IFRS.

Non-GAAP measures are not subject to audit unless they are included in Fonterra’s audited annual financial statements.

About Fonterra

We’re an Aotearoa, New Zealand dairy co-operative owned by 10,000 farming whānau (families). Through the spirit of co-operation and a can-do attitude, Fonterra’s farmers, along with 20,000 employees around the world, share the goodness of our milk through innovative consumer, foodservice and ingredient brands. Sustainability is at the heart of everything we do, and we’re committed to leaving things in a better way than we found them. Everyday people working hard to be Good Together in the community.

Porirua City to apply for living wage accreditation

Source: Porirua City Council

Porirua City Council is set to become a fully accredited living wage employer.
Council has been paying staff the living wage since 2019, and last year extended this to also apply to contractors, as contracts come up for renewal. At a meeting this morning Council voted to formally apply for accreditation to reflect those earlier decisions.
Porirua Mayor Anita Baker said the time was right to take this step, to recognise the commitment already made.
“It’s important to us that our people are paid a wage that allows them to live with dignity, and that’s why we’ve been paying our staff the living wage for some time.
“It makes sense to take this final step of applying for formal accreditation from the Living Wage Movement, so we can make it official.”
Mayor Baker said the move also showed regional alignment in the way local government paid their employees and contractors.
The Living Wage Movement Aotearoa NZ was formed in 2012 and there are now more than 300 businesses or organisations accredited as living wage employers.
The Living Wage Movement advise that employers report reduced staff turnover, create a more productive work environment and increased business as a direct result of paying a Living Wage. Workers talk about spending more time with their families, feeling valued, less stressed, and consequently happier and more motivated in their workplaces.
“Our people are what make this city special and they deserve to be properly compensated for their work,” Mayor Baker said.