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Split-off part boosts Fonterra's profits
Fonterra has had a good first quarter, with profits up almost 6%, but this is entirely due to the activities transferred to Lactalis. Meanwhile, Fonterra is lowering its milk price forecast for the current year by 50 US cents per kilogram of fat and protein.
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Fonterra is implementing the reduction for two reasons: there is a large supply of dairy products on the global market, which is putting pressure on prices, and it expects to increase its own milk production. The forecast is for 1.545 million kilos of milk solids to be supplied in the current year, 20 million kilos more than initially anticipated.
The expected payout price is lowered from NZ$9 to $11 per kilo of milk solids to NZ$9 to $10 per kilo of milk solids. The mid-price also increases from NZ$10,00 to $9,50.
So far, however, the company's results are still good. Profit for the first quarter (from July onwards) is higher than in the first quarter of last year, reaching NZ$278 million, of which NZ$158 million was attributable to continuing operations. The remaining NZ$120 million was earned by the Mainland Group, the group of businesses acquired by Lactalis. It is noteworthy that profit from continuing operations is NZ$10 million lower than in the same period last year, while total profit for the first quarter of this year is actually NZ$15 million higher.
The sale of the Mainland Group is expected to close sometime in the first half of 2026. At that time, the additional NZ$2 per share dividend can be distributed to Fonterra members/shareholders. The additional hurdle that still needs to be overcome is a new vote by the members' council on this matter. Only then can the proceeds actually be cashed out.