Fonterra Shareholders (FSF) H2 2025 earnings summary

Executive summary

• Strategy execution remains focused on food service and ingredients, with new capacity coming online by 2026 and robust plans to remove stranded consumer costs.

• Group revenue reached NZ$26 billion in FY25, up 15% year-over-year, with strong demand for high-value dairy products and robust shareholder returns.

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

• China consumer business remains a drag but is being restructured to support Anchor Food Professionals, with further cost optimization and portfolio trimming planned for 2026.

• Management is confident in delivering on operating profit targets, with a $250 million bridge from FY 2025 to FY 2028 split roughly 50/50 between cost base and divisional exchange.

Financial highlights

• FY 2025 benefits from a hedging book, providing a $100–$120 million gain over FY 2024, but this narrows in FY 2026, reverting to long-term averages and creating a $100 million headwind.

• Operating profit increased 13% to NZ$1,732 million compared to the prior year.

• Profit after tax was NZ$1,079 million, down 4% year-over-year, but up 13% on a tax-adjusted basis.

• One-off costs of $80 million in FY 2025 (impairments, redundancies, business exits) will not recur in FY 2026, providing a benefit to results.

• ERP costs peak in 2026, then decline: $50 million over 2025–2026, $70–$90 million in 2027, with some spend remaining in 2028.

Outlook and guidance

• CapEx expected to be slightly above $1 billion in 2026–2027, then decline to ~$600 million from 2029 onwards.

• FY26 forecast earnings range is 45-65 cents per share, excluding divested businesses.

• 2025/26 Farmgate Milk Price forecast is NZ$9.00–$11.00 per kgMS; milk collections revised up to 1,525 million kgMS.

• Net debt projected to rise towards $2.60 billion by 2028, with a relatively light profile in FY 2026.

• Guidance range for FY 2026 is driven by food service margin and stream returns; downside risks include US tariffs and food service margin pressure.