Fonterra posted strong interim results as the New Zealand dairy co-operative continues to focus on its B2B offering and progresses on plans to sell its Consumer unit.
The co-op posted net profit NZ $729m (up 8%); operating profit of NZ $1.07m (up 16%), earnings per share of 44 cents (up 10%) and interim dividend (fully imputed) of 22 cents per share. FY25 earnings range remained at 55-75 cents.
ROC was down from 13.4% to 10.2% and the forecast farmgate milk price range narrowed to NZ $9.70 - $10.30 per kgMS with a midpoint of NZ $10.00.
Milk collections are forecast to rise 2.7% to 1.510 million kgMS thanks to favorable pasture growth across most of New Zealand earlier in the season – though drier conditions have now set in.
The co-op’s Ingredients business was the largest growth driver in sales terms, generating operating profit of NZ $696 million (up NZ $229m) despite lower sales volumes this half (-3.9%).
Foodservice operating profit was down from NZ $342m in FY24 to NZ $230m over higher input costs; and Consumer saw improved volumes (+8.5%) and margin growth despite the higher farmgate milk price. Operating profit largely flat on prior period at NZ $173 million.
“The co-op is in a great shape, with milk collections, the forecast Farmgate Milk Price and earnings performance all up on this time last year,” said CEO Miles Hurrell.
“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.”
Snap verdict
The strength of Fonterra’s interim results would only strengthen its hand in the imminent negotiations with investors and strategic buyers over the future of the co-op’s Consumer and associated businesses.
Fonterra is evaluating both a float and a trade sale, but has maintained that it won’t rush its decision – setting up the stage for a potential bidding war between investors and strategic buyers in order to determine what would be the best value proposition for its farmer owners.
At the same time, Fonterra’s strategy to focus on B2B through the co-op’s Ingredients and Foodservice units is on track – the co-op having announced additional manufacturing capacity for both divisions, with site works now underway at Studholme for high-value protein capacity and at Edendale for a new UHT cream plant.
Farmers will also benefit from increased sustainability-linked funding thanks to deals with Nestlé and Mars, on top of the co-op’s own sustainability pricing structure.
