Export prospects are running hot for its coffee culture star, Milklab, and other plant-based beverages, but the outlook has soured for some of Noumi's traditional longlife dairy product lines in offshore markets.
Noumi has warned spiking raw milk prices caused by local processors scrambling to source milk supplies had begun to undermine Australia's competitiveness as a dairy exporter.
This year's leaping farmgate milk values had caused "subdued" interest and "dampening demand" from some export customers when it comes to accepting flow-on price increases for longlife dairy products.
Noumi's managing director, Michael Perich, said significant structural change had occurred, when compared with historical export trends, because of declining milk production and increased competition for volume.
He told the beverages and nutritional product company's annual general meeting, while discussions with export customers had been productive, Noumi have to prune back its dairy exports in order to achieve positive margins overseas.
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High raw milk prices would force his company, and others, to quit or scale back their sales to lower margin markets overseas this financial year, especially for commodity dairy products.
"It's important to note that these issues are not unique to Noumi," he said.
"We expect margins on export sales to remain lower than domestic margins in the medium term."
Although the processor's overall export sales volumes lifted almost 16 per cent in 2021-22, thanks largely to gains by plant-based beverages, Mr Perich said Noumi had weathered a challenging year, particularly in the dairy segment.
Longlife dairy sales volumes dropped four per cent to 246 million litres, lactoferrin sales volumes were down almost a quarter to 21 tonnes, and overall the company posted a statutory net loss across the business of $161m after a 5pc revenue fall to $522m.
Fortunately plant-based product sales were up overall by 3.4pc to almost 90m litres and achieved a 7pc rise in net revenue growth to $164m.
Sales of cafe specialty brand, Milklab, jumped almost 19pc to nearly 50m litres.
The Milklab line targets baristas with beverage ingredients ranging from mainstream dairy milk to lactose-free dairy and products based on almond, soy, macadamia, coconut and oats.
We see the percentage of plant-based product sales continuing to increase in a market growing 15pc a year in Australia alone.
- Michael Perich, Noumi
"New Milklab Oat and Australia's Own Barista Oat products launched in mid-2021 continue to gain market share within the plant-based beverages category and we are expanding our distribution points in Australia and South East Asia," Mr Perich said.
"Today plant-based beverage sales represent almost one third of group sales - up from 22pc three years ago.
"We see this percentage continuing to increase in a market growing 15pc a year in Australia alone."
Plant-based growth
He said plant-based ingredients were now served in one in every four cafe lattes.
Noumi's first quarter of the new financial year saw Milklab sales jump another 32pc and overall plant-based sales lift 19pc.
Total revenue for the quarter grew 4pc on the same time last year to $134m.
The company's focus on key future profitability drivers would include increasing plant-based volumes for local markets and particularly South East Asia as part of a general rebuild and reshaping of its export business.
Company chair, Genevieve Gregor, said despite numerous cost challenges last financial year, the re-named and slimmed down former Freedom Foods business made significant progress as it continued recovering from the 2020 discovery of extraordinary accounting oversights which led to write-downs and revised financial reports totalling almost $600m over several years.
Its "reset, transform and grow" reincarnation strategy had seen the dairy and nutritional division largely complete its reset phase to focus on operational and cost improvements to lift earnings, while the plant-based beverages division was moving strongly into its grow phase.
Disappointing
The substantial work already done had helped Noumi weather the past year's difficult macro-economic conditions, but Ms Gregor conceded, aside from the record result from plant beverages, "overall financial performance was disappointing".
However, the company was committed to lifting the dairy and nutritional division's performance, regardless of the challenges and volatility in that market.
Aside from competitive milk supply costs, Mr Perich said Noumi, which has manufacturing plants in Shepparton and Sydney, had struggled with sector-wide factors which cut, including supply chain difficulties caused by COVID-19, workforce availability and market access issues which eroded revenue.
Working with farmers
The company intended to "work co-operatively" with its dairy farm suppliers to fill its milk volumes needs, while also negotiating and renegotiating milk supply contracts with retail customers to recover rising processing costs including energy, and address some cases of historical product under-pricing.
He said the Australian dairy sector had changed dramatically in the second half of last financial year, with all processors facing unprecedented expenses in farmgate raw milk prices, plus other global and domestic supply chain cost pressures.
Part of Noumi's response to the changing market and cost conditions had been to remove loss making product lines from its offering.
It had also adopted more efficient milk buying practices, and scaled back its activity in the low-margin bulk milk trade.
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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).
