Fonterra reports profit of US$1B in FY25

NEW ZEALAND – Fonterra Co-operative Group Ltd has reported its FY25 annual results, which generated US$15.05 billion ($26 billion) in revenue and delivered US$9.38 billion ($16.2 billion) in total cash returns to shareholders.

Reported profit after tax was US$636.6 million ($1.1 billion), equivalent to earnings per share of 65 cents.

This was down slightly on the prior year, reflecting Fonterra’s higher tax expense in FY25 after the Co-op elected not to deduct distributions to farmer shareholders from taxable income and instead attach imputation credits to dividends.

When excluding the costs associated with the Consumer divestment, Fonterra’s normalised earnings per share were 71 cents, in line with last year’s result. 

The Co-op delivered a Return on Capital of 10.9%, in line with the target range of 10-12%.

CEO Miles Hurrell, said, “We continue to see good demand from global customers for our high-quality products made from New Zealand farmers’ milk and this is driving returns through both the Farmgate Milk Price and dividends. 

“Our vision is to be the source of the world’s most valued dairy. Our strategy is designed to grow end-to-end value for farmers by focusing on being a B2B dairy nutrition provider, working closely with customers through our high-performing Ingredients and Foodservice channels.”

Normalised earnings per share were 71 cents, no change, up 13 cents tax-adjusted. FY25 full-year dividend, fully imputed, was 57 cents per share, up from 55 cents unimputed

Return on capital was 10.9%, down from 11.3%, up from 10.0% tax-adjusted. Farmgate Milk Price was NZ $10.16 per kgMS.

Milk collections were 1,509 million kgMS, up 2.6%. The Farmgate Milk Price range was NZ $9.00 – $11.00 per kgMS. The earnings range was 45-65 cents per share, while milk collections were revised up to 1,525 million kgMS.

Divestment

Fonterra undertook a dual-track divestment process for its global Consumer and associated businesses to Lactalis for US$2.44 billion ($4.22 billion), subject to approvals. 

The group is targeting a capital return of $2.00 per share from the divestment proceeds if it progresses, which is equivalent to US$1.85 billion ($3.2 billion). 

The Fonterra Board intends to make a final decision on the amount and timing of the capital return once the sale agreement is unconditional, cash proceeds are received in New Zealand and having regard to other relevant factors including Fonterra’s debt and earnings outlook at the time.

Outlook  

The Co-op has revised its forecast milk collections for the 2025/26 season from 1,490 million kgMS to 1,525 million kgMS.

“Favourable weather conditions experienced during the previous season are forecast to continue through spring, supporting pasture growth,” says Mr Hurrell. 

“Global Dairy Trade prices continue to be robust, as does demand from customers for our products sold off GDT. However, the risk of potential volatility in commodity prices and exchange rates from geopolitical dynamics remains.” 

Fonterra’s FY26 forecast earnings from continuing operations, which excludes the businesses to be divested, are 45-65 cents per share.

Looking further ahead, as well as targeting earnings to return to current levels in three years, Fonterra has confirmed that it is maintaining the strategic targets and policy settings announced in September 2024, provided that the Mainland Group is divested.

This includes a target average Return on Capital of 10-12% from FY26, which is above Fonterra’s 5-year average. 

“We have amended our Debt to EBITDA target to less than 3 times and maintained our target gearing ratio of 30-40%, reflecting an appetite to maintain conservative balance sheet settings,” it stated.

While there are always risks that may impact future performance, Fonterra continues to target dividend payments within its policy range of 60%-80% of earnings in the medium term.

“Our ongoing balance sheet strength, combined with our focused strategic direction, means the Co-op is well prepared for the future and positioned to continue delivering positive returns to shareholders,” said Mr Hurrell.

Subscribe to receive our email newsletters with the latest news and insights from Africa, the Middle East and around the world. SUBSCRIBE HERE