Australia's soaring farmgate milk prices continue to harm the dairy industry's export competitiveness and have forced processor Noumi to lose a fifth of its once burgeoning Asian market.
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Noumi, a major producer of longlife milk, cream and plant-based beverage lines, including the coffee culture favourite, Milklab, absorbed what it called an "unprecedented" 26pc jump in the price of raw milk during 2022-23.
Farmgate milk is Noumi's single biggest input cost.
Managing director, Michael Perich, said the ongoing disparity between the Australian farmgate price and global markets, including New Zealand's current plummeting farmer payments, was harming Australian dairy industry competitiveness and making it difficult to pass on the higher milk cost to customers.
In 2022-23 Noumi subsequently made the decision to abandon more than 20pc of its export milk product sales to Asia and focus on markets and lines with better margins.
However, the struggling former Freedom Foods' beverages and nutritional products business has managed to make the most of the positives in its operations, pruning its net loss after tax to $47m, down from a $161m loss the previous financial year.
The statutory loss might have even been an $800,000 profit if not for non-cash impairments and a $40m downgrading of the market fair value of convertible notes the company holds
Plant-based beverage lines, particularly in the Milklab range, helped lift group revenue 5.6 per cent to $551m.
A significant turnaround in Noumi's dairy and nutritional products earnings in the second half saw that division end the year with an adjusted earnings before interest, tax, depreciation and amortisation almost breaking even, compared with the previous full year's $20m loss.
The consumer nutritionals portfolio, including Crankt and Vital Strength products, enjoyed 11pc revenue growth on the back of new product launches and the post-COVID lockdown recovery in gym market activity.
Noumi's lactoferrin powder plant at Shepparton met healthy demand, although last year's northern Victorian floods and a shortage of high quality resin used in the extraction process had disrupted output.
"We are pleased to have delivered solid revenue and earnings growth ... as our focus on higher margin sales and cost discipline helped offset the impact of cost inflation, higher farmgate milk prices and weak consumer demand in some overseas markets," said Mr Perich, whose family is Noumi's cornerstone shareholder.
The Perich family's big Leppington Pastoral Company dairy farming interests helped recapitalise Noumi two years ago, bringing it back from the brink of collapse after the 2020 discovery of accounting inconsistencies and outdated stocks forced it to stop trading on the Australian Securities Exchange for almost a year.
"The past year was one of meaningful progress," Mr Perich said.
"Our focus for the coming year is to build on these achievements by driving distribution of the plant-based milks business domestically and internationally and consolidating the turnaround.
"While there is more to do, we can now see the progress we have made in the past two years and our clear strategy is making us a more efficient, productive and resilient business.
He said the business was well placed to navigate the ongoing external challenges and deliver long term success.
During the past year its Marrickville consumer nutritionals plant in Sydney closed and production was integrated with the dairy products packaging plant at Ingleburn.
Production of lower margin plant-based beverages and lines previously destined for the slowing Chinese market was discontinued.
Noumi also sold its stake in the Australian Fresh Milk Holdings dairy farming business, also partly owned by the Perich family.
It used the funds to pay a litigation settlement with the Californian Blue Diamond Almond Growers co-operative and a dispute with surf culture coffee products distribution group, Sunday Collab.
Mr Perich said court proceedings brought against the company by the Australian Security and Investments Commission, plus a separate class action by shareholders, were still progressing.
The litigation relates to alleged breaches in its accounting and financial disclosure reports and a subsequent $590m earnings write down which triggered Noumi's share price collapse.
Noumi has admitted to alleged continuous financial disclosure obligation breaches in 2018-19 and 2019-20, highlighting that they related to its history as Freedom Foods, which was eventually broken up and half the company sold to Arnotts.
Mr Perich said the company would continue investing in its Milklab brand to expand its range and distribution in export and domestic markets, having lifted sales by 10.3pc last financial year, including 40pc in direct to consumer sales.
Milklab sells in 22 countries, achieving a notable 8pc growth in South East Asian sales last year.
Noumi was also closely monitoring global dairy price developments and the local industry's ability to recover from milk supply shortages and high costs.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
