Fonterra reports profits and strategy progress
Image: Fonterra
New Zealand dairy giant Fonterra has reported that its operating profit was up by 16% to NZ$1,107 million, while its profit after tax increased by 8% to NZ$729 million in its interim fiscal year 2025 report. “The co-op continues to make good progress on implementing its strategy,” the dairy noted. Fonterra CEO Miles Hurrell says it’s pleasing to be able to deliver these results for farmer shareholders and unit holders: “We’re focusing on driving value which includes delivering strong financial performance while achieving the highest sustainable farmgate milk price (FMP).
“At the same time, we’re looking ahead as we implement our strategy and continue to invest for the future. We have commenced projects to unlock manufacturing production capacity for our ingredients and foodservice channels, with site works now underway at Studholme for high-value protein capacity and at Edendale for a new UHT cream plant.
“We’re also continuing to invest to future proof our operations and supply chain network, with work underway on a new Whareroa coolstore and plans for decarbonisation projects at Clandeboye, Edendale, Edgecumbe and Whareroa to secure energy supply and reduce the co-op’s emissions.
“As we focus on delivering the strongest farmer offering, we have announced new funding for farmers with lower emissions milk and expanded the fixed milk price programme that farmers can use to get more certainty around the farmgate milk price,” he notes.
Fonterra is committed to delivering the highest sustainable Farmgate Milk Price to farmers. For the current season, the forecast Farmgate Milk Price range is narrowing from $9.50-$10.50 per kgMS to $9.70-$10.30, with the midpoint holding at $10 per kgMS.
“We’re seeing good demand for our quality products, and our teams have worked hard to optimise our product portfolio to capture value from the market conditions, leaving us well contracted for the season,” Hurrell observes.
“We have also optimised the current season’s advance rate schedule to get cash to farmers sooner, underpinned by our balance sheet strength. In terms of milk flows, our forecast milk collections for the year are up 2.7% on this time last year to 1,510 million kgMS. This follows favourable pasture growth across most of New Zealand earlier in the season, noting many parts of the country are currently experiencing very dry conditions.”
Fonterra’s half year performance was underpinned by an optimised product mix, designed to capture value across the co-op’s sales channels. “Our robust first half performance saw earnings growing alongside the strong farmgate milk price, reflecting the strength of our core business,” Hurrell states.
“Ingredients channel performance has been a highlight this half, with sales volume down 3.9% and operating profit up $229 million to $696 million, reflecting better margins and improved product mix.
“Our foodservice channel has seen sales volume growth of 8.3% this half, with second quarter gross margins significantly up on the first quarter as pricing adjusted to the higher milk price. Foodservice operating profit for the half was a healthy $230 million, compared to the record high of $342 million in FY24, when input costs were much lower.
“The consumer channel saw good sales volumes, up 8.5%, and margin growth, despite the higher FMP, with the operating profit largely flat on the prior period at $173 million.
“Meanwhile, our IT & Digital transformation project, a once in a generation replacement of the Co-op’s Enterprise Resource Planning software, is progressing well and remains on budget. The project is expected to cost NZ $450-500 million across six years and annual expenditure reaches its peak in FY25 at $130 million. This spend is included in our previously announced earnings forecast and despite this spend, our FY25 results remain strong.
“The co-op is in a great shape, with milk collections, the forecast FMP and earnings performance all up on this time last year. As we look to the balance of the year ahead, we’re focused on maintaining this momentum in performance, while progressing delivery of our strategy, including the dual-track consumer divestment process, which is on track as planned,” Hurrell concludes.
