Fonterra says it will take just three years to fill the gap in earnings left by the planned $4.4 billion sale of its consumer business to France’s Lactalis.
The co-op reported a net profit of $1.079b for the July 2025 year, down 4.3% on the previous year’s profit, while maintaining its milk price forecasts.
The slight profit decline was largely because of a higher tax bill as previous tax losses became unavailable.
Fonterra said its Ingredients business was the standout performer, with an operating profit of $1.101b, up $163 million.
The group’s normalised earnings per share came to 71c, which was unchanged and within Fonterra’s forecast range of 65c-75c.
Fonterra announced a full-year fully imputed dividend of 57c per share – a record – up from 55c (unimputed).
The dividend, together with the milk price paid to farmers, equates a total payout to farmers of $16b.
Total revenue jumped by 15% to $26b.
The proposed sale of the consumer and related businesses, under the Mainland brand, will be put to farmers on October 30.
If approved, the sale is expected to go through in the first half of next year.
The dairy co-op confirmed its farmgate milk price for the season just past at $10.16/kgMS (per kilo of milk solids) – a record – and up one cent from its previous forecast.
For the current season, Fonterra’s latest forecast is for the milk price to be in a range of $9 to $11/kgMS – with a $10 mid-point – unchanged from its previous forecast.
Chief executive Miles Hurrell said he was confident about the $10.00/kgMS price forecast for this year.
“There is no question that there is a bit of uncertainty out there in the international market,” Hurrell told a results briefing.
“The geopolitics taking place are leading to an uncertain future for some of our buyers,” he said.
“But we still feel confident about that.
“We know there will be additional milk coming through in places like North America and less so in Europe, but we are still seeing strong demand in those countries.”
High milk prices have in the past acted as a headwind for Fonterra’s profitability because milk is its biggest input cost, but the last few years have proven to be the exception.
Hurrell said dairy markets generally have become deeper, which has helped add more certainty to prices, with price discovery also assisted by futures market pricing.
“The depth in liquidity in the dairy markets now is significantly greater than what it has been previously,” he said.
Chief financial officer Andrew Murray said the co-op had, over the last three years, become smarter in how it goes about its pricing to ensure it maintains margins.
Murray told the Herald Fonterra had become better at fast-moving consumer goods (FMCG) management.
In terms of the impact of Mainland’s possible departure from the group, Murray said the business had been operating “relatively independently” for the last nine months.
Forsyth Barr senior analyst Matt Montgomerie said the co-op had produced a “solid group of numbers”.
“It’s reasonably healthy relative to history and they’ve put it down to taking costs out, plus just the product mix shifting towards high-value ingredients and Foodservice,” Montgomerie said.
The co-op has forecast earnings per share for the current year of 45c to 65c.
“Our balance-sheet strength gives us the confidence to return capital, invest in the future of the business and maintain our dividend policy,” Hurrell said.
The co-op delivered a return on capital of 10.9%, in line with the target range of 10-12%.
“The result was driven by higher operating profit in the Ingredients business, due to demand for our protein portfolio and our use of margin-hedging tools and index-based pricing,” Hurrell said.
Foodservice sales volumes continued to grow off the back of continued demand in Greater China for high-value products, including UHT cream, butter and mozzarella.
Mainland benefited from sales volume growth in the Consumer business and the Australia business, having a stable milk price against higher global commodity prices.
Hurrell said 2025 had been one of the co-op’s strongest years yet in terms of shareholder returns.
“We continue to see good demand from global customers for our high-quality products made from New Zealand farmers’ milk, and this is driving returns through both the farmgate milk price and dividends,” he said.
Fonterra was positioning itself to deliver further value through its remaining Foodservice and Ingredients businesses.
Hurrell said it had a pipeline of potential growth investments it was assessing, with plans to invest up to $1b over the next three to four years in projects to generate further value and drive operational cost efficiencies.
Looking ahead, Fonterra’s projects include growing the value of its existing protein portfolio, in addition to the recently announced investment at Studholme, to support the Ingredients business.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.