By Farmers Weekly,Gerald Piddock

Copyright farmersweekly

Reading Time: 3 minutes

By Gerald Piddock and Hugh Stringleman

Fonterra has delivered record revenue, dividends and earnings in the 2025 financial year and has forecast that those numbers will be matched within three years after the intended sale of Mainland Group.

Farmer-shareholders will vote on the divestment on October 30. If approval is gained the co-operative says it will pay $2 a share capital return to farmers and unit holders in 2026.

Meantime it will pay 35c final dividend fully imputed on October 15 along with the last wash-up payments from the $10.16/kg milk solids farmgate milk price for 2024-25.

The forecast milk price range for 2025-26 remains $9- $11/kg MS and the earnings range 45c to 65c a share.

Fonterra chair Peter McBride said it is one of Fonterra’s best years in terms of farmer returns.

“I’m proud of the results of our teams here and globally have delivered this year,” Fonterra CEO Miles Hurrell said.

Hurrell said to support its ingredients business, the co-operative plans to invest in new manufacturing capacity in its plants in New Zealand as well as $1 billion in further growth projects.

“These projects include growing the value of our existing protein portfolio, adding value to our milkfat through new cream and butter investments and improving site operations through data and [artificial intelligence] automation.”

This new manufacturing capacity will be in value-added products such as butter and cream cheese rather than investing in new plant and steel to support increased milk production, which had been the case in the past, he said.

Fonterra CFO Andrew Murray said the three-year earnings target post-sale will be achieved by executing its strategy and driving the performance of its ingredients and food service businesses, which will offset the Mainland earnings.

“It means our co-op will be a more focused business, with a lower cost base, delivering a better return.”

Group revenue last financial year to July 31 was a record $26 billion, up 15%, and total cash returns to shareholders were $16bn, including $15bn for milk and $916 million in dividends, being 57c a share fully imputed, up from 55c unimputed.

Dividend payment is 80% of the 71c share normalised earnings. Return on capital was 10.9% in line with the target range 10-12%.

Total cash return to farmer-shareholders will be $10.73/kg, well more than the previous record payout $9.50 in the 2021-22 dairy season.

Operating profit was $1.732bn, up 13%, and the profit after tax $1bn, down 4% but up 13% tax adjusted for the imputation credits.

Fonterra’s net debt on balance date was $2.6bn, unchanged on the previous year.

Hurrell said this is a robust position and provides optionality for the future.

Fonterra has increased its forecast milk collection for the current season from 1490m kg milk solids to 1525m, an increase of 2.3%.

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

He is also confident of the milk price forecast holding up, despite a recent lift in northern hemisphere production.

“We’re still confident of $10/kg MS. There’s no questions there’s some uncertainty out there in the international market.

“We know there’s additional milk coming through in places like North America, less so in Europe, but we’re still seeing strong demand in those countries. Yes there might be more milk in the international market, but at the same time, strong demand for dairy products.”

McBride said there is still plenty to do, despite the strong result.

“While we celebrate today result, we still have a lot to do and if you think you have reached the destination, then it’s time to hang up your boots.”