Fonterra Reports Strong Profits And Stable Milk Price
Business news is presented by
Fonterra has posted a strong performance in its third-quarter update, with normalised profit after tax reaching $1,158 million. This marks an increase of $119 million compared to the same time last year. As a result of this performance, the co-operative has narrowed its full-year forecast earnings range to 65-75 cents per share, lifting the lower end of the previous range.
Alongside these results, Fonterra confirmed its opening forecast Farmgate Milk Price for the 2025/26 season at $10.00 per kgMS. This matches the midpoint of the current season’s forecast, which remains unchanged at $9.70-$10.30 per kgMS. The Co-op’s Chief Executive Miles Hurrell said: “We’ve delivered strong shareholder returns through FY25, including a 22-cent interim dividend, and as we get closer to the end of the year, we are focused on maintaining this momentum.”
Hurrell added that demand for reference products remains firm, underpinning both current and future price forecasts. “Looking at the season ahead, we expect this demand to continue for now, but we acknowledge the ongoing geopolitical uncertainty and the potential for a wider series of outcomes across the season.” The $10.00 per kgMS price represents around $15 billion into the New Zealand economy, much of which supports regional communities.
Fonterra’s business strategy has delivered results across multiple areas. The Q3 operating profit came in at $1,740 million, up $267 million on the previous year. Return on capital stands at 11%, slightly down from last year’s 11.9% but still within the Co-op’s long-term target of 10-12%. Hurrell said the result “reflects the scale and ongoing strength of our Ingredients channel, and volume growth in our Foodservice and Consumer channels.”
Looking ahead, Hurrell noted that flat earnings are expected in Q4 due to seasonal factors, higher input costs, investment in the ERP system, and transformation efforts following the proposed divestment of Fonterra’s global Consumer and associated businesses. “We are heading into year end with a strong balance sheet and full year debt metrics on track to be below the Co-op’s target range.”
Fonterra’s strategy is focused on its high-performing Ingredients and Foodservice businesses, with divestment of its Consumer operations now progressing. “We have been thoroughly testing the terms and value of both a trade sale and initial public offering (IPO) as divestment options. This work is on track as planned and we will seek farmer shareholder approval to divest through a vote in due course.”
Hurrell added: “Given the confidence we have in our strategy, we have strong conviction that a divestment is the right choice for the Co-op and its owners.” He said the aim remains to pay the highest sustainable Farmgate Milk Price and deliver long-term shareholder value. Fonterra also continues to target a significant capital return to shareholders and unit holders once the divestment is completed.