Fonterra Co-operative Group Ltd has revealed a NZ 50 cent increase in its 2024/25 forecast Farmgate Milk Price midpoint, now sitting at NZ$9.00 per kgMS for New Zealand farmers.

The company also announced its FY25 earnings guidance of 40-60 cents per share, as revealed in an ASX announcement. 

CEO Miles Hurrell attributed the increase to rising global dairy prices and tight milk supply in key producing regions. 

“I’m pleased to be announcing an increase in this season’s forecast Farmgate Milk Price, which I’m sure will be welcome news for farmers, particularly when combined with the 55 cent total dividend for FY24 also announced by the Co-op today,” said Hurrell.

Fonterra’s updated Farmgate Milk Price range for the 2024/25 season is between $8.25 and $9.75 per kgMS. 

Hurrell emphasised the cautious approach, noting the early stage of the season. “We’ve also announced today our forecast earnings for FY25 of 40-60 cents per share.” 

“The forecast earnings range reflects an expectation we will maintain strong margins in all three of our sales channels, while also investing in the Co-op’s IT & digital transformation and incurring higher tax expenses,” he added.

In light of these developments, Fonterra is set to face new tax implications. Chief Financial Officer Andrew Murray confirmed that, following several years of strong performance, the company had exhausted its tax losses in FY24. 

As a result, Fonterra will now begin paying taxes, which will affect its future earnings reports.

“When we declare a dividend from FY25 and beyond, imputation credits will now be available to be attached to our dividend,” Murray stated. 

He also explained that the changes in tax treatment for supply-backed shares would lead to higher taxes paid by Fonterra. 

“While this does not impact the operating performance of Fonterra, it will reduce our reported earnings per share in future years, as Fonterra will have paid the tax on the cash to be distributed.”

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Australia’s manufacturing sector remained under pressure midway through the third quarter of 2024, with the latest Purchasing Manager’s Index (PMI) data from Judo Bank indicating ongoing deterioration in sector conditions. 

Despite some signs of optimism, the industry grappled with declining new orders, reduced production, and tightening supply conditions throughout August.

The headline seasonally adjusted Judo Bank Australia Manufacturing PMI rose slightly to 48.5 in August, up from 47.5 in July. 

Although this marks the softest pace of contraction since May, it still signifies the seventh consecutive month of declining sector conditions.

“While slightly below the neutral level, the Australian Manufacturing PMI rose in August and is now at the highest level in three months,” said Warren Hogan, chief economic advisor at Judo Bank. 

“Australia’s manufacturing industries have been in an extended soft patch for 18 months with the PMI readings and activity indicators moving around between index levels of 45.0 and 50.0.”

Manufacturing production contracted at the fastest pace since March, driven by another significant reduction in new orders. 

Many Australian manufacturers attributed this decline to the adverse effects of high interest rates and subdued domestic demand. 

However, there was a silver lining, as foreign demand conditions showed improvement, with export orders rising for the first time since May. 

The increase in export orders, particularly from mainland China and Southeast Asian economies, was the most pronounced since September 2022.

“However, the August report shows some green shoots with a jump above the 50.0 mark for new export orders and a jump up in the future output index to the highest level in 18 months,” Hogan added. 

“But we saw a similar green shoot earlier this year that gave way to renewed weakness by June.”

The reduction in overall new orders led to a further decrease in backlogged work, prompting manufacturers to cut headcounts for the third consecutive month. 

Despite this, the pace of job shedding slowed, with reports indicating that some firms were hiring in anticipation of future output increases.

“New orders and output remain soft at readings below 50.0, while employment rose above 50 to signal an expansion in the demand for labour in manufacturing. The good news is that conditions in the manufacturing sector are not deteriorating, although a genuine recovery remains elusive,” Hogan noted.

Inventory levels also declined, as manufacturers hesitated to accumulate stock amidst falling new orders. 

Supply chain disruptions, particularly in the Red Sea region and Southeast Asian ports, worsened lead times, contributing to rising transport costs and exacerbating cost inflation in August.

“Unfortunately, there are no signs of easing manufacturing price pressures coming through the survey in the middle of 2024,” Hogan stated. 

“This is consistent with the rising Producer Price Index from the Australian Bureau of Statistics. The June quarter shows an increasing trend with a 4.8% annual rate recorded.”

As manufacturers raised selling prices at a faster pace to cover these costs, both input cost and output price inflation remained below their respective series averages in August. 

However, the ongoing pressures suggest that the road to recovery for Australia’s manufacturing sector remains challenging.

“Final prices rose towards a 55.0 index reading in August, which, if sustained, will lead to the highest readings in more than a year,” Hogan warned. 

“Manufacturing output prices can be volatile month-to-month, so this needs to be monitored in the months ahead.”

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Austal Limited announced its financial results for the fiscal year ending 30 June 2024 (FY2024), reporting a significant turnaround with Earnings Before Interest and Tax (EBIT) of $56.5 million. 

This marks a substantial improvement from the FY2023 loss of $4.8 million, despite a 7 per cent year-over-year decline in revenue to $1.468 billion, the ASX-listed company said in a media release. 

Austal’s EBIT performance was driven by its US operations, particularly from improved contributions in shipbuilding and a robust showing from its support business. 

The company’s record order book, valued at $12.7 billion, extends over a decade, providing a solid foundation for future growth.

Financial overview

The company’s revenue of $1.468 billion for FY2024 represents a slight decline from $1.585 billion in FY2023, primarily due to a reduction in shipbuilding activities as programs transitioned. 

Despite this, EBIT surged to $56.5 million, aligning with market expectations of a 3-4 per cent EBIT margin.

Exceptional items included a $57 million provision for legal costs and fines related to US regulatory investigations, and a $54 million profit from the sale of land in the US Austal’s Net Profit After Tax stood at $14.9 million, a recovery from the $13.8 million net loss recorded in FY2023.

Operational highlights

Austal’s US segment reported revenue of $1.17 billion, down from $1.23 billion in FY2023, with EBIT rising to $92.9 million from $5.2 million. 

The segment benefited from a stronger performance in shipbuilding, which recovered to an EBIT of $25.1 million. 

The company secured $1.4 billion in new contracts during the year, including a $779 million modification for the T-AGOS program.

In contrast, the Australasia segment faced challenges with a 17.3 per cent decline in revenue to $302.9 million, largely due to fewer commercial shipbuilding awards and delays in key government programs. 

Consequently, the segment reported an EBIT loss of $12.6 million.

Strategic developments

Austal’s order book reached a record $12.7 billion as of 30 June 2024, bolstered by recent contract wins and additional awards. 

The company is poised to secure further defence projects in both the US and Australia through the Strategic Shipbuilding Agreement (SSA) with the Commonwealth of Australia.

The company also announced changes to its leadership, with former US Secretary of the Navy Richard Spencer joining the board and assuming the role of Chairman on 1 July 2024, replacing John Rothwell. 

Additionally, Michelle Kruger was appointed as President of Austal USA.

Outlook

According to Austal, it remains confident in its growth prospects, underpinned by its record order book and expanding revenue base. 

The company plans a substantial capital expenditure program focusing on its US facilities, expected to commence in FY2025, to support future revenue and earnings growth.

CEO Paddy Gregg expressed optimism, stating, “Austal is now working on 14 different vessel programs, providing the company with diversity and a long runway of work and revenue.” 

“Our focus is now on executing these programs safely and efficiently, while adding to our order book as opportunities arise,” he added. 

Austal will provide EBIT guidance at or before its Annual General Meeting, with anticipated growth as operations in Australasia recover.

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VEEM, a prominent designer and manufacturer of high-technology marine propulsion and stabilisation systems, has announced record financial results for the year ending 30 June 2024. 

In an ASX announcement, the company reported a net profit after tax (NPAT) of $7.0 million, reflecting a 70 per cent increase compared to the previous year.

VEEM’s revenue surged by 35 per cent year-on-year, reaching $80.6 million, while total activity for FY24 stood at $81.6 million, marking a 29 per cent growth from FY23. 

The company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) saw a 48 per cent rise, amounting to $14.8 million. 

These results were achieved despite nonrecurring costs, including a $0.5 million amortisation expense for a liver cancer research project and $0.8 million in initial expenses related to the Sharrow propeller project.

“We are very pleased to be able to report a 70% increase in NPAT to $7.0 million for FY24,” said Mark Miocevich, managing director of VEEM. 

“This comes on the back of a 35% increase in revenue to over $80 million, which is a record for VEEM.”

The company’s earnings per share (EPS) also saw a significant rise, reaching 5.15 cents per share, up 70 per cent from the previous period. 

Strong cash flow from operations, which increased by 77 per cent to $8.4 million, allowed VEEM to make debt repayments totaling $4.0 million, further strengthening its financial position.

A major highlight of the year was the surge in gyro sales, which grew by 147 per cent to $12.3 million, driven by Strategic Marine’s accelerated purchases. The company also secured orders worth $3.4 million as of 30 June 2024.

In addition, VEEM signed an exclusive worldwide licence agreement with Sharrow Engineering to manufacture and sell Sharrow-designed propellers for inboard vessels. 

These propellers will be branded as SHARROW by VEEM, with customer rollouts already underway. Propulsion sales increased by 30 per cent during the year, reaching $32 million.

“The increased propeller capacity installed late in FY23 was utilised early in the year to reduce the order backlog in propellers,” Miocevich noted. 

“Subsequently, propulsion sales stabilised, contributing significantly to our record revenue.”

VEEM said its investment in research and development (R&D) remained strong, with the company spending $4.5 million on formal R&D projects during FY24. 

Additionally, over $4.6 million was invested in capital and development expenditures, including robotics for its Baile Rd facility and improvements in gyro engineering.

“Currently, the outlook for FY25 is that the core business will continue to generate similar levels of activity,” Miocevich added. 

“We are focusing on generating growth in revenue through new products, markets, and regions, as well as internally focused on improving margins,” he noted.

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BlueScope has reported a net profit after tax (NPAT) of $805.7 million for FY2024, marking a $203.5 million decline from FY2023. 

Despite this decrease, Managing Director and CEO, Mark Vassella, emphasised the company’s strong performance in light of ongoing macroeconomic and industry challenges. 

“Underlying EBIT for the year was $1.34 billion, which reflects a solid performance amidst volatility,” Vassella stated. 

He credited the resilience of BlueScope’s US steelmaking and global downstream operations, which helped offset the impact of low-cycle Asian steel spreads on the company’s Australian and New Zealand steelmaking businesses.

Operating cash flow for the year, after capital expenditure, was reported at $434 million, down from FY2023. 

This decrease was attributed to slightly lower earnings, increased working capital, and higher capital expenditure as BlueScope invests in long-term sustainable growth. 

Despite the reduced operating cash flow, the company maintained a strong balance sheet, ending the year with $364 million in net cash. 

Vassella acknowledged the critical role of BlueScope’s customers and employees, thanking them for their contributions to the company’s ongoing success.

Throughout FY2024, BlueScope continued to advance its ‘Transform, Grow, Deliver’ strategy. 

Notable achievements included the ramp-up of the North Star expansion in the US, alongside the Board’s approval for additional debottlenecking and the evaluation of further value chain integration with a potential cold rolling and metal coating facility. 

In Australia, the company progressed with a new metal coating line in Western Sydney and the blast furnace reline and upgrade at Port Kembla. In New Zealand, BlueScope commenced a project to install an electric arc furnace at the Glenbrook site.

Additionally, BlueScope is positioning its 1,200 hectares of land across Australia and New Zealand for strategic value, with a near-term focus on residential land supply at West Dapto and a SuperTAFE at Port Kembla. 

For more details on this announcement, please visit BlueScope’s website. 

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Amaero International, an ASX-listed company with manufacturing and corporate headquarters located in Tennessee, USA, has updated its financial guidance, revising key projections for capital expenditures and EBITDA breakeven timelines.

In its latest Investor Presentation dated 14 August 2024, Amaero has adjusted its estimated capital expenditures for the three-year period from FY2024 to FY2026 to $71.5 million, up from the previous estimate of $71.3 million. 

The adjustment reflects a deferral of $7.4 million in expenditures originally budgeted for FY2024, which will now be allocated to FY2025. 

For FY2024, actual expenditures totalled $11.2 million, significantly lower than the earlier estimate of $18.6 million.

The company has also revised its EBITDA breakeven estimate. Previously projected for calendar year 2025, Amaero now expects to achieve EBITDA breakeven in FY2026. 

This delay is attributed to the need for the company to complete the qualification of its C103 product by the end of the second quarter of FY2025. 

Additionally, the updated estimate considers revenue from offtake and preferred supplier agreements, scaling production of the first atomizer throughout the calendar year 2025, and commercial demand for isostatic powder pressing (IPP) components.

Amaero’s Chairman and CEO, Hank Holland, will provide further insights during an investor briefing scheduled for 11:30 am AEST today, where he will discuss the company’s anticipated milestones for FY2025 and address any questions from stakeholders.

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The latest Ai Group Australian Industry Index for June shows that the manufacturing sector remains in contraction, with the index rising 14.7 points to -25.6 points, marking 26 consecutive months of decline.

Key manufacturing indicators point to continued challenges within the industry. Activity, sales, new orders, and employment showed a slight rebound after a particularly weak May but remained in negative territory, indicating persistent struggles.

According to the report, input prices and wages significantly increased in June, highlighting ongoing cost and inflation pressures.

Capacity utilisation marginally rose to 76.5 per cent, reflecting continued supply-side pressures, particularly for labour.

In particular, food manufacturing was the only sub-industry to report expansion in June, with a notable growth of 11.8 points.

In trend terms, the food, beverages, and TCF (textiles, clothing, and footwear) sector has been recovering throughout 2024.

Respondents noted strong demand and increased interest from overseas customers, despite the impact of inflationary pressures.

The chemicals industry continued its recovery, lifting 9.9 points to -8.6. Conditions in this sector have been improving steadily throughout 2024, with manufacturers reporting increased customer demand, improvements in overseas orders, and growth in long-term projects.

Machinery and equipment improved by 1.3 points to -4.8, indicating a broadly stable performance. Manufacturers in this sector reported increased export sales, improved customer confidence, and an uptick in new orders.

The minerals and metals sector continued to decline, falling by 8.7 points. This marks the lowest result for minerals and metals manufacturers since the index began in 2020.

The Australian PMI (all manufacturing) indicator increased by 4.7 points in June but remains in contraction at -26.5.

The Australian PCI (construction) indicator saw a significant improvement, easing by 44.9 points from May’s deep contraction to -23.2.

Despite these changes, construction has been deteriorating since mid-2023, while manufacturing has consistently experienced mild contraction.

According to Ai Group, manufacturers have reported lower orders, rising input prices, and increased competition for skilled staff.

Constructors have faced supply delays, input cost pressures, and a widespread decline in customer confidence.

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The headline seasonally adjusted Judo Bank Australia Manufacturing Purchasing Manager’s Index (PMI) posted 47.2 in June, down from 49.7 in May.

This indicated a fifth successive monthly deterioration in manufacturing sector conditions and at the fastest pace since May 2020.

Matthew De Pasquale, economist at Judo Bank, said: “Following two months of improvement, the manufacturing sector’s key activity indicators have softened to the cyclical lows seen earlier in the year.”

He continued, “Manufacturers are marginally scaling back production through reduced headcounts and inventories in response to prolonged difficult trading conditions in the sector.”

Manufacturing production contracted in June amid fewer new orders placed with Australian goods producers. According to panellists, elevated interest rates and soft market conditions underpinned the latest fall in sales and demand.

The pace at which new orders and production declined was the fastest in three months and especially steep in the case of orders.

The fall in total sales appeared to be centred on the domestic market as export orders were broadly unchanged in June.

“Despite a four-month upward trend that brought the manufacturing output index slightly under the neutral level, the index dipped in June to the lowest in three months and was slightly lower than the early flash reading. The manufacturing new orders index has also returned to cyclical lows through June,” De Pasquale noted.

As a result of the reduction in new work, capacity pressures further eased for Australian manufacturers, signalled by another steep reduction in backlogs of work.

Job shedding also returned to the Australian manufacturing sector, after employment levels rose only slightly in May. The pace at which employment levels fell in June was solid and the fastest since March.

Meanwhile, purchasing levels also fell in line with lower orders and production, with buying activity declining at an even faster pace.

Australian goods producers indicated reluctance in holding additional inventory during a period of falling demand. Both stocks of purchases and finished goods shrank in the latest survey period.

“Manufacturing activity readings have fluctuated between 45 and 50 since October 2023, indicating a sustained but not worsening contraction amidst ongoing cost-of-living pressures.”

“With business activity slowing over the month, the employment index dipped back below the neutral level. Manufacturers, on average, have been gradually reducing headcounts throughout 2024,” De Pasquale commented.

Turning to prices, average input costs continued to increase in June, attributed to higher raw material, currency conversion, and transport-related costs.

Supply-side shortages also played a role in raising prices, with lead times lengthening at a sharp pace, as vendors faced constraints with shipping delays and supply shortages.

According to the report, the overall rate of input price inflation eased from May, falling further below the series average. In turn, goods producers raised selling prices at a less pronounced rate, the slowest in three months.

“After stabilising at pre-pandemic levels in 2023, margin pressures in the manufacturing sector appear to be picking up. The input price index climbed significantly to 58.4 in June, which, while slightly down on the prior month, is above the average reading of 56.0 seen over the first four months of the year. The rise in input price pressures doesn’t appear to have been passed onto consumers, with the output price index remaining subdued at cyclical lows in June,” De Pasquale explained.

Sentiment in the Australian manufacturing sector remained positive in June, as signalled by an above 50.0 print of the Future Output Index.

However, the level of confidence eased to a seven-month low as concerns gathered over rising costs and competition dampening sales.

“The May Manufacturing PMI results water down the likelihood of the predicted manufacturing rebound suggested in the May PMI. Despite the soft June results, some relief is still anticipated for consumer goods manufacturers through 2024-25 as households benefit from tax cuts and government cost-of-living measures from July 1,” De Pasquale concluded.

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The global manufacturing sector experienced an upswing in May, with significant improvements in both output and new orders, according to the JP Morgan Global Manufacturing PMI.

The composite index, which is produced by JP Morgan and S&P Global Market Intelligence in collaboration with ISM and IFPSM, climbed to a 22-month high of 50.9, indicating growth for the fourth consecutive month.

“The May global manufacturing output PMI rose 1.2 points to 52.6, its highest level since December 2021,” said Bennett Parrish, Global Economist at JP Morgan.

“At this level, the PMI is consistent with solid 2.5%ar growth in global factory output,” he noted.

Key regions such as the United States, China, and the United Kingdom saw accelerated output growth, while contraction rates eased in Japan and the euro area.

“Gains in the new orders and employment PMIs also point to an upturn moving ahead. The base of the revival is broadening, with the survey improving across most of the major economies,” Parrish stated.

In May, manufacturing production increased at its fastest pace since December 2021, marking growth in the intermediate goods industry to a near three-year high and the investment goods sector expanding for the third time in the past four months.

Despite a slight deceleration, consumer goods remained the top-performing category overall.

The recent expansion in global manufacturing output was driven by rising new business intakes, the completion of backlogs, and enhanced international trade flows.

New business rose for the fourth consecutive month, achieving the highest growth rate since March 2022.

For the first time in over two years, all three sectors—consumer, intermediate, and investment goods—registered concurrent growth.

International trade volumes increased for the second month in a row in May, reversing a prolonged period of contraction.

Growth was particularly notable in the consumer and investment goods sectors, which offset a slight decline in the intermediate goods category.

Larger nations such as China, the US, India, and Brazil reaped the benefits of improved global trade flows.

The positive trends in manufacturing conditions also influenced the labor market and business confidence.

May recorded job creation for the second time in the past three months, with the rate of growth being the highest since August 2023.

The US, Japan, India, and Brazil saw employment increases, while staffing cuts were reported in China, the euro area, and the UK.

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Australia’s manufacturing sector continued to experience a slight deterioration in operating conditions during May, according to the latest Purchasing Manager’s Index (PMI) data from Judo Bank.

The headline seasonally adjusted Judo Bank Australia Manufacturing PMI recorded 49.7 in May, a marginal rise from 49.6 in April, indicating a fourth consecutive month of declining conditions, albeit at a reduced pace.

Manufacturing production fell marginally as new orders declined less sharply. New export orders rose for the first time since late 2022, supporting a slight increase in employment and accumulation of finished goods.

Pre-production stock holdings continued to decrease, reflecting softened optimism among manufacturers, while price pressures intensified.

“Although the manufacturing output index remained just below the neutral level in May, it has shown a steady increase for three consecutive months since its cyclical low point in February,” said Matthew De Pasquale, economist at Judo Bank.

He continued, “This positive trend is mirrored in the new orders, which have also seen signs of improvement, increasing for two consecutive months.”

Higher prices and subdued market conditions negatively affected demand, though less severely than in April. Notably, new export orders increased due to higher new work inflows from clients in the US, Europe, and Asia.

This improvement in export conditions led Australian manufacturers to raise their workforce capacity in May, marking the first increase in headcounts since last October.

“With the slowdown in activity coming to a halt, we are starting to see an improvement in the sector’s employment indicator,” added De Pasquale.

“The manufacturing employment index surpassed the neutral 50.0 level in April for the first time in seven months, suggesting that manufacturers are no longer shedding labour,” he noted.

Purchasing activity contracted again in May, aligning with the fall in overall new orders and production.

The reduction in buying activity and manufacturers’ reluctance to hold additional raw materials and semi-finished items resulted in decreased stocks of purchases.

However, manufacturers accumulated finished goods following four months of depletion.

Lead times lengthened once more in May, attributed to disruptions in the Red Sea and supply shortages.

Despite the slower pace of lengthening lead times, transport costs rose again, alongside higher raw material and financing costs, leading to another increase in average input prices.

Australian manufacturers responded by raising their charges more quickly in May.

“The pick-up in manufacturing input and output price pressures is reflective of trends seen in recent official inflation data,” noted De Pasquale.

He added, “The input price index rose to 60.0, the highest level since November 2022, and the output price index, representing inflation of consumer prices, rose to its highest reading in over a year.”

Overall sentiment in the manufacturing sector remained positive in May, with firms expecting better market conditions, new product launches, and marketing efforts to drive sales in the coming year.

However, confidence eased to a six-month low amid concerns over heightened competition and rising prices.

“Despite the recovery in activity levels, the future output index, a proxy for business confidence, remains historically weak for the sector and has shown little improvement over the past six months,” said De Pasquale.

“The May Manufacturing PMI results point to improving conditions for Australia’s manufacturers over the year ahead. With real household disposable incomes rising in the second half of 2024 and global good price inflation stabilising, manufacturer conditions will likely continue to improve throughout the year.” he explained.

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