Fonterra lifts Q1 profit as co-op sticks to earnings and milk price guidance

Fonterra CEO Miles Hurrell. Photo / NZME

Fonterra says its new financial year is off to a solid start after reporting a slight lift in total group profit for the first quarter.

Chief executive Miles Hurrell said the quarter’s earnings were in line with this time last year.

He noted global commodity prices in the period were higher compared to last season. 

Fonterra’s total group profit after tax for the three months to October 31 was $278 million, up $15m – the equivalent to 17 cents per share.

Excluding the costs associated with the Consumer divestment, Fonterra’s normalised earnings per share came to 18c, up slightly on last year.

Continuing operations delivered net profit $158m, or 9c a share, slightly down on the same period last year.

Fonterra maintained its full-year earnings range for continuing operations of 45-65 cents per share.

In October, farmer shareholders voted to approve the divestment of Mainland Group to French dairy giant Lactalis for $4.22 billion.

“This is a significant milestone and we’ve received a strong mandate from farmer shareholders on our strategy to grow value as a global B2B [business to business] dairy provider,” he said.

“We are firmly focused on delivering the commitments we’ve made, not least our target to lift earnings back to financial year 2025 levels by 2028, offsetting the impact of the divestment of Mainland Group.”

Fonterra plans to invest up to $1b over the next three to four years in projects to generate further value and drive operational efficiencies.

Last week, Fonterra revised its forecast farmgate milk price range for the season from $9-$11 per kgMS to $9-$10 per kgMS, with a new midpoint of $9.50 per kgMS.

This was after strong global milk collections put downward pressure on commodity prices, with the co-op revising its forecast collections for the season from 1525 million kgMS to 1545 million kgMS.

Some of the regulatory approvals required have been obtained for the Mainland sale, including approval from the Overseas Investment Office.

Other regulatory approvals are still pending.

Subject to these steps being achieved, Fonterra continues to expect the transaction to complete in the first half of the 2026 calendar year.

Fonterra is targeting a tax-free capital return of $2 per share to shareholders and unit holders, equivalent to around $3.2b, once the sale is complete.

Another shareholder vote will be required for the payment of the capital return, which will be implemented by way of a Court-approved scheme of arrangement.

Fonterra expects that vote to occur on February 19 next year.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.

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