Fonterra lifts profit, dividend but flags lower milk prices

The news: New Zealand dairy giant Fonterra has lifted its full-year profit and dividend but flagged lower prices for its milk products in the current year.

The numbers: The company said net profit for the year to 31 July jumped 170% to NZD1.6 billion ($1.47 billion), while revenue was up 11% to NZD26 billion. That translated to reported earnings of 95 NZ cents a share, up from 36 NZ cents a year ago. It lifted full-year dividend to 50 NZ cents a share, from 20 NZ cents.

The context: While the dual-listed Fonterra’s results reflect strong margins and improved demand in FY23 as lockdowns eased in key market China, the situation has since reversed as milk prices have dropped due to reduced demand for whole milk powder. CEO Miles Hurrell flagged challenging conditions in FY24, with the dairy producer forecasting a farm gate price of NZD6.00 to NZD7.50 per kilogram of milk solids, with a midpoint of NZD6.75, down from an average price of NZD8.22 in FY23.

What they said: “We are watching market dynamics closely and there are indications demand for New Zealand milk powders will start to return from early 2024. Demand for other products, including Foodservice and our value-added ingredients, continues to be robust,” Hurrell said.