Fonterra Lifts Milk Price Forecast To $10
Business news is presented by
- Fonterra raises FY25 Farmgate Milk Price midpoint to $10 per kgMS, citing strong demand.
- Strategic investments include new UHT cream plant and protein production upgrades in New Zealand.
- Q1 profit of $263 million reported, with focus on high-value products and operational efficiency.
Fonterra Co-operative Group has raised the forecast Farmgate Milk Price for the 2024/25 season to $10.00 per kgMS, up by 50 cents. The revised range of $9.50 to $10.50 per kgMS reflects robust global demand and shifting market dynamics.
“We’re committed to providing farmers the highest sustainable milk price, so I’m pleased to announce another lift in the forecast for the season,” said Fonterra CEO Miles Hurrell.
Hurrell highlighted recovering demand in Greater China and steady growth from Southeast Asia, alongside local production increases in most parts of New Zealand. Supply constraints in the US and Europe also influenced the upward adjustment.
Fonterra has maintained its FY25 earnings guidance at 40-60 cents per share, while continuing to make strides in its strategic goals.
Progress On Strategic Investments
The cooperative announced several major investments aimed at boosting returns and strengthening its business. These include:
- Studholme Site Expansion: $75 million allocated to increase production capacity for high-value protein ingredients.
- Edendale UHT Cream Plant: A $150 million investment to support Foodservice growth, creating 70 jobs in Southland.
- Whareroa Cool Store: A $150 million project to build a facility capable of storing 26,000 tonnes of cheese.
Additionally, Fonterra has introduced Anchor Easy Bakery UHT Cream, targeting mid-tier markets in China, and is divesting its global Consumer business and integrated operations in Oceania and Sri Lanka.
“We are focused on maintaining momentum in our financial performance while the divestment process is underway,” Hurrell said.
Q1 Financial Performance
The cooperative reported a strong start to FY25, with Q1 profit after tax reaching $263 million. Despite narrower price relativities and higher milk costs compared to last year, improved product mix and lower starting inventory contributed positively.
“Our forecast earnings range reflects an expectation of stable underlying operating profit. Improved sales volumes, product mix, and pricing will help offset higher milk costs,” Hurrell explained.
Operating expenses for the quarter aligned with expectations, as Fonterra continues to invest in IT and infrastructure transformation.