Fonterra has reported a $2.6 billion after-tax profit for FY26 and announced an additional $1b investment in its South Island manufacturing network over the next three years.
The co-operative generated $27b in revenue and $19.6b in cash returns to farmer owners and unit holders during the year to July 31.
Reported operating profit rose 97.6% to $3.4b, including a $1.2b benefit from the sale of Mainland Group, while profit after tax increased 142%.
Excluding the divested consumer businesses, underlying operating profit increased 23.6% to $1.8b and underlying profit after tax reached $1.2b.
Underlying earnings rose 17 cents to 71 cents per share, while return on capital increased from 11.7% to 14.2%.
Fonterra chair Peter McBride says the result came in at the upper end of the co-operative’s expectations.
“Consistency is important to farmers and our shareholders. We’re proud of the collective effort that’s delivered another strong result, at the top end of our earnings guidance,” McBride says.
“The team hasn’t missed a beat despite the Mainland divestment process and the significant change that followed.”
Record shipping volumes
Fonterra chief executive Richard Allen says the co-operative collected, processed and shipped near-record milk volumes during FY26.
“Despite some challenging conditions, including weather events and geopolitical volatility, we leveraged our full supply chain network and logistics partnerships to keep milk moving, achieving record shipping volumes and materially improving our delivery performance,” Allen says.
Fonterra’s Ingredients business delivered $1.29b in operating profit, supported by global demand for protein, favourable pricing and product allocation decisions.
Foodservice operating profit reached $547m, driven by volume and pricing growth across its product categories and markets.
The result means Fonterra has already reached its target of returning earnings to FY25 levels within three years of divesting its consumer businesses.
“One year ago, we set a target for earnings to return to FY25 levels within three years if the Consumer and associated businesses were divested,” Allen says.
“I’m pleased to share that our team’s focused execution of strategy in FY26 has got us to that target already.”
South Island investment
Fonterra will use capital retained from the Mainland Group sale and operating cash flow to accelerate and expand its South Island protein manufacturing network.
The additional $1b programme will also fund projects intended to improve water use, energy resilience and emissions performance.
“These projects position the Co-op to respond to changes in how people want to consume dairy, with a growing focus on sustainably produced, protein-rich and nutrient-dense foods,” Allen says.
The investment is intended to shift more milk away from whole milk powder and other commodities towards higher-value products.
It will increase processing capacity, strengthen existing customer relationships and support new opportunities as demand for advanced dairy proteins grows.
Once operational in 2029, the projects are expected to create between 50 and 60 permanent positions while supporting local companies involved in construction.
Fonterra invested $1b in sustainability and growth projects during FY26 and expects annual capital expenditure of between $1.3b and $1.6b over the next three years.
Its replacement enterprise resource planning system remains on schedule and within budget, with five sites operating on the platform and two more expected to go live later this year.
Milk price and dividends
The final farmgate milk price for the 2025/26 season was set at $9.69 per kilogram of milk solids.
Fonterra’s final organic milk price reached a record $14.13 per kgMS.
The co-operative declared a fully imputed final dividend of 33 cents per share, taking total FY26 dividends to 73 cents.
That total includes the 24-cent interim dividend and a 16-cent special dividend associated with the Mainland sale. Total dividends were up from 57 cents in FY25.
Fonterra is forecasting a Farmgate Milk Price of $9.50 per kgMS for the 2026/27 season, within a range of $8.50 to $10.50.
Its forecast organic milk price is $14.30 per kgMS, with a range of $13.30 to $15.30.
Milk collections are expected to exceed 1.6 billion kgMS, although Fonterra says it is preparing for the possibility of an El Niño weather pattern.
Forecast FY27 earnings are between 65 and 85 cents per share.
“Geopolitical volatility remains and with only two months complete, previous seasons tell us that things can always change,” Allen says.
“The sale of Mainland Group was a significant step forward. Now, as we head into an increasingly changing world, our farmers’ quality, grass-fed milk, combined with our flexible assets, reliable supply chain and deep customer and market presence will help us deliver growth into the long-term.”
