Fonterra has reported a 2.8% lift in first-half net profit to $750 million, increased its interim dividend and confirmed a special dividend of 16c a share following the sale of its consumer business.
Fonterra also lifted its forecast farmgate milk price range and its full-year earnings guidance.
Operating profit rose by 11.2% to $1.23 billion, on total group revenue of $13.9b, up 10.3%.
Fonterra announced a 24 cents per share interim dividend, compared with 22c in the previous comparable period. It also lifted its forecast milk price payout.
For the current season, the forecast farmgate milk price range has increased from $9.20-$9.80 per kg of milksolids to $9.40-$10, with a $9.70/kg mid-point, up from $9.50.
The co-op lifted its full-year forecast earnings range to 50-65 cents per share, up from 45-65c.
Chief executive Miles Hurrell said the upgrades reflected improvement in global commodity prices and Fonterra’s “strong underlying margins and cost control”, but noted that significant volatility remains, particularly as the conflict in the Middle East continues.
“The underlying performance of Fonterra’s continuing business is stable, allowing the co-op to return all earnings associated with the Mainland Group business and lift our forecasts for the remainder of the year ahead. Demand for our products is strong, and we’re focused on our plan to maximise both the Farmgate Milk Price and earnings,” Hurrell said.
Fonterra Ingredients business saw sales volumes decline slightly, but revenue climbed from $8.7b to $9.5b. Operating profit in that channel declined from $740m to $560m despite an 11.7% increase in gross margin. The difference was in the cost of goods sold, which climbed to $8.4b from $7.5b.
The Foodservice channel experienced flat sales volume growth,, but revenue climbed to $2.8b from $2.6b and operating profit surged from $172m to $372m.
“The first half of the year has been shaped by strong milk flows, with the co-op collecting record milk volumes in the South Island so far this season,” Hurrell said.
“When combined with several adverse weather events, these conditions have put pressure on the operations of all New Zealand milk processors.
“We have been able to navigate through these challenges due to the resilience of our network.”
Fonterra recently sold its global consumer and associated businesses, Mainland Group, to Lactalis for $4.22b. The transaction is unconditional and expected to be completed at the end of March 2026.
“Our focus now is firmly on our strategy to grow value for farmers as a global B2B dairy nutrition provider, working closely with customers through our high-performing Ingredients and Foodservice channels,” Hurrell said.
“We are focused on maximising value from farmers’ milk and are building new manufacturing capacity across several New Zealand sites to help meet growing demand for our high-value proteins, butters and creams,” he said.
Hurrell said the conflict in the Middle East is having an impact on Fonterra’s supply chain and has the potential to increase Fonterra’s inventory levels and costs over the course of the second half of the year.
There was also the potential for further volatility in global commodity prices.
“The conflict is a complex and dynamic situation that is changing daily, but we are confident that we’re on the right track to get product to customers.
“Our business is designed to manage volatility. Our scale and strong relationships with customers and logistics provider Kotahi will help us to navigate through these challenges better than most. With this in mind, we remain focused on delivering on our strategic targets,” Hurrell said.