The annual report from New Zealand dairy co-op Fonterra shows NZ$26bn in revenue for the 2024/25 financial year, with $16.2bn delivered in cash returns to shareholders.
Fonterra also announced a full year dividend of 57 cents fully imputed, and at the upper end of its dividend policy, equating to $916m of cash to shareholders and unit holders.
Operating profit rose to $1.7bn, up from $1.5bn the previous year; profit after tax was $1.1bn. This was down slightly on the previous year, reflecting the co-op’s higher tax expense after elected not to deduct distributions to farmer shareholders from taxable income and instead attach imputation credits to dividends.
“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,” said CEO 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.
“The business proposed to be divested, Mainland Group, benefited from sales volume growth in the consumer business and the Australia business having a stable milk price against higher global commodity prices.
“Operating costs largely increased due to investment in a once-in-a-generation Enterprise Resource Planning software replacement as well as costs associated with the Consumer divestment process.”
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The final farmgate milk price was $10.16 per kgMS, the co-op added, equating to $15.3bn in milk payments to New Zealand farmers, up $3.8bn on last year.
“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,” said CEO Miles Hurrell.
“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, we’ve taken 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 $4.22bn, subject to approvals.
“We’re also positioning the co-op to deliver further value through our food service 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 $1bn over the next three to four years in projects to generate further value and drive operational cost efficiencies.”
Projects include growing the value of Fonterra’s existing protein portfolio, in addition to the recently announced investment at Studholme, to support its Ingredients business; adding value to milkfat through new butter and cream cheese investments; and investments in site operations including its Enterprise Resource Planning system replacement, data, AI and automation.
