Farmers celebrate Fonterra’s record dividend and profit

He told Dairy News that farmers will be very pleased with the results. The results delivered $15.3 billion in milk payments to farmer shareholders and another $916m in cash to fully cashed-up shareholders and unitholders - a dividend of 57c/share.

The co-op also recorded $26b in revenue last year, up 15% on the previous year. Operating profit jumped 13% to $1.7b and profit after tax was over $1b.

Stevenson says Fonterra’s financial results show a continuation of the co-op delivering on what it has promised.

“We expect that farmers will use the returns from a strong milk price and dividend for a mix of debt repayment, repairs and maintenance and investment in capital expenditure to drive future efficiencies.

“We anticipate that this will have a significant positive impact on the regional communities within which we operate.”

Fonterra chief executive Miles Hurrell says FY25 has been one of the co-op’s strongest years yet in terms of shareholder returns.

“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.”

During the year the co-op took important steps towards this goal, including running a robust divestment process for global Consumer and associated businesses. This resulted in an agreement to sell the businesses to Lactalis for $4.22 billion, subject to approvals.

“We’re also positioning the co-op to deliver further value through our Foodservice and Ingredients businesses, including continuing to invest in new manufacturing capability to meet growing customer demand for our high-value products.

“We have a pipeline of potential growth investments we’re assessing, with plans to invest up to $1 billion over the next three to four years in projects to generate further value and drive operational cost efficiencies,” says Hurrell.

Projects include growing the value of the existing protein portfolio, in addition to the recently announced investment at Studholme, to support the ingredients business, and adding value to milkfat through new butter and cream cheese investments to support both Foodservice and Ingredients businesses.

Fonterra is also investing in operations including enterprise resource planning system replacement, data, AI and automation.

Hurrell says that through focused execution of strategy, the co-op is targeting earnings to be back at current levels within three years, offsetting the earnings impact of divesting the Consumer and associated businesses.

“Our balance sheet strength gives us the confidence to return capital, invest in the future of the business and maintain our dividend policy.”

Strong Performance

Fonterra's total group reported operating profit increased to $1.7 billion, up from $1.5 billion the year prior.

Reported profit after tax was $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%.

“This result was driven by higher operating profit in the Ingredients business, due to demand for our protein portfolio and our use of margin hedging tools and indexed-based pricing,” says chief executive Miles Hurrell.

“Foodservice sales volumes continue to grow off the back of continued demand in Greater China for our high-value products including UHT cream, butter and mozzarella.”