Ex-Fonterra Suppliers Face Stricter Share Sell-Down Requirements
Dairy farmers, still holding onto their Fonterra shares despite switching milk supply elsewhere or exiting the industry, now face a stricter share sell-down requirement.
Speaking at the co-op’s annual meeting in Hamilton this morning, chief executive Richard Allen says Fonterra generated $27 billion in revenue and returned nearly $20 billion in cash to farmer owners and unit holders.
The co-op closed the 2025-26 season with a final Farmgate Milk Price of $9.69/kgMS, while organic farmers received a record $14.13/kgMS.
Total dividends for the year were 73c/share, fully imputed, up from 57 cents. That included the 16-cent special Mainland dividend paid in April.
In the underlying business: operating profit was $1.8 billion, up 23.6%, while earnings were 71c/share and return on capital was 14.2%, above the 10–12% target range.
Allen says both B2B businesses performed strongly.
Ingredients delivered $1.29 billion in operating profit, supported by strong global protein demand, favourable pricing and strategically market aligned product mix decisions and tactics.
Foodservice delivered $547 million, with volume and pricing growth across all product categories and markets.
Allen also touched on the sale of Fonterra’s Mainland Group to Lactalis for $4.22 billion.
The case was simple, he says.
“Our Ingredients and Foodservice businesses earn a better return on your milk and your capital than the consumer business.
“We completed the sale in March and returned the capital to you via a $2 distribution.
“When we asked for your support, we made you a commitment. Selling Mainland meant giving up its earnings, so we set ourselves the goal of growing our earnings back to FY25 levels within three years.
“We said three years. We did it in one. That's the B2B strategy you backed, working as intended: a more focused co-op earning more from your milk and your capital.
“Our overarching goal is to get the most value from your milk through our Ingredients and Foodservice businesses.
“More and more we see high value consumers around the world wanting to understand the quality and nutritional value of the food they consume. The way we make our grass-fed dairy – sunshine and rain - is special and in demand.
“This combined with the nutritional superiority of dairy proteins and fats creates a unique and growing opportunity for future value creation. Our strategy is focused on capturing this value.”
