Fonterra Co-operative Group (FCG) H2 2025 earnings summary

Executive summary

• Leadership expressed strong satisfaction with FY25 results, highlighting hard work, delivery of solid numbers, and robust shareholder returns, with total payments of $16.2b and a $10.73 average payout per supplying shareholder.

• Group revenue reached NZ$26 billion in FY25, up 15% year-over-year, driven by strong demand for high-value dairy products.

• Strategic focus shifted to B2B dairy nutrition, with divestment of global Consumer and associated businesses agreed for NZ$4.22 billion.

• Operating profit rose to $1.7b, up $205m, driven by strong Ingredients margins and favorable hedging.

• Agreement reached to sell Mainland Group to Lactalis for $4.22b, targeting a $2.00 per share capital return if completed.

Financial highlights

• EBIT growth target of approximately $250 million by FY2028, with about half driven by cost base reduction and half by business mix improvements.

• Operating profit increased 13% to NZ$1,732 million; profit after tax was NZ$1,079 million, down 4% but up 13% tax-adjusted.

• Farmgate Milk Price increased to $10.16 per kgMS from $7.83; dividend rose to 57c (imputed) from 55c (unimputed).

• FY2025 benefited from a $100–$120 million uplift due to hedging, expected to revert to long-term averages in FY2026.

• One-off costs totaling about $80 million in FY2025, including impairments and business exits, were not normalized in reported results.

Outlook and guidance

• FY26 Farmgate Milk Price range maintained at $9.00–$11.00 per kgMS; continuing operations earnings forecast at 45–65c per share.

• CapEx expected to be around $1 billion annually through 2027, peaking slightly above before returning to ~$600 million from 2029 onwards.

• Net debt projected to rise gradually, reaching $2.6 billion by FY2028, with a relatively flat profile through the period.

• Targeting a return to current earnings levels within three years post-divestment.

• Dividend policy maintained at 60%-80% of earnings; Return on Capital target remains 10-12%.