Fonterra has posted $1.16 billion normalised profit after tax for the nine months to April 30, up 11% on the same period last year, as it announced a solid opening milk price for the next dairy season.
The co-operative also confirmed its opening forecast farmgate milk price for the 2025/26 season at $10 per kilogram of milk solids, supported by steady near-term global demand for dairy.
Chief executive Miles Hurrell says the company remains focused on delivering strong shareholder returns, both through earnings and payouts to farmers.
“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 says.
Fonterra’s updated forecast for the 2024/25 season remains unchanged, sitting in a range of $9.70 to $10.30 per kilogram of milk solids, with a midpoint of $10 per kgMS.
“We’re also pleased to tighten our year-end forecast earnings within the existing range, given the strength of our third quarter performance,” Hurrell says.
The current season’s forecast payout equates to roughly $15 billion flowing into the New Zealand economy—most of it into rural regions.
For the new season ahead, Fonterra’s opening forecast Farmgate Milk Price of $10 per kgMS comes with a broader range of $8 to $11 per kgMS, reflecting what the company called “geopolitical uncertainty and the potential for a wider series of outcomes.”
Third quarter performance
Fonterra reported a 13% rise in normalised earnings per share to 70 cents. Operating profit rose to $1.74 billion, up $267 million on the same period last year. Return on capital for the 12 months was 11% — down from 11.9%, but still within the co-op’s long-term 10–12% target.
“This result reflects the scale and ongoing strength of our ingredients channel, and volume growth in our foodservice and consumer channels with each channel increasing its third quarter performance compared to the same period last year,” Hurrell says.
The full-year earnings forecast is now narrowed to 65–75 cents per share, assuming flat fourth-quarter earnings due to seasonal milk collection trends, higher input costs for the consumer and foodservice divisions, enterprise resource planning system investments, and restructuring costs post-divestment.
“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,” Hurrell says.
Divestment plans
Hurrell reaffirmed Fonterra’s strategy to focus on high-performing B2B segments, particularly ingredients and foodservice, while preparing for the divestment of its global consumer and associated businesses.
“Last year, we announced a step-change in our strategic direction, including a decision to divest our global consumer and associated businesses.
“This step was grounded in an understanding of how we best create value for farmer shareholders and ultimately for New Zealand,” he says.
Fonterra is weighing both a trade sale and IPO for the divestment, and will seek farmer shareholder approval before proceeding.
“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,” Hurrell says.
“If we divest our consumer business, we will still be a co-op with global reach and scale, and a diverse product mix sold to customers in more than 100 countries.
“By focusing on our core strengths and the sales channels that deliver the highest returns, we have the confidence to target an average return on capital of 10–12%, which is above our five-year average. This is alongside paying farmers the highest sustainable Farmgate Milk Price, which we are always committed to.”
