🥛 Fonterra Ups Earnings Forecast as Dairy Demand Stays Resilient; Eyes Divestment of Consumer Units

Auckland | May 29, 2025 — New Zealand’s largest dairy cooperative, Fonterra, has revised its annual earnings forecast upwards, reflecting strong performance across its ingredients and consumer businesses despite global market uncertainties. The company reported an 11% jump in third-quarter profits, with a normalised post-tax profit of NZ$1.16 billion (USD 692 million), according to Reuters.

The upbeat result sent Fonterra shares climbing 0.9% to NZ$4.60, their most significant intraday gain in over a week. The cooperative’s optimism stems largely from its robust ingredients business, which remains its core strength, along with growing volumes in foodservice and consumer product segments.

🧮 A Solid Outlook for Dairy Prices and Farmgate Returns

Fonterra has maintained a confident forecast for the next season, projecting an initial farmgate milk price of NZ$10 per kgMS, with a range between NZ$8 and NZ$11. CEO Miles Hurrell noted that global demand appears stable, though geopolitical uncertainties remain a key risk that could impact margins later in the season.

Fonterra also lifted its full-year earnings per share guidance to 65–75 NZ cents, up from the previous 55–75 NZ cents range.

🏭 Potential Divestment of Global Consumer Units

In a move to sharpen its strategic focus, Fonterra is considering a divestment or IPO of its global consumer division, which includes operations in Oceania and Sri Lanka. Jeremy Sullivan, investment advisor at Hamilton Hindin Greene, remarked that this could help the cooperative achieve more stable long-term returns, with a target of 10–12% return on capital, up from the current five-year average of around 9%.

This restructuring could signal Fonterra’s pivot toward high-return, value-added B2B dairy ingredients and foodservice, especially in Asia and the Middle East, while reducing exposure to fluctuating consumer-facing markets.

📈 Industry Context: New Zealand’s Dairy Dynamics

According to the latest IndexBox report on New Zealand’s powdered milk market:

• Exports remain dominant with high demand for dry whole and skim milk powders.
• Milk yield and per capita consumption have been relatively stable.
• New Zealand remains a leading global supplier to dairy import-dependent markets such as China, Southeast Asia, and parts of the Middle East.

Fonterra’s ingredients division continues to benefit from this positioning, offering functional dairy proteins, powders, and fats used by global food brands and manufacturers.

🌍 Global Dairy Caution: Volatility Still Looms

Analysts note that while the current results are strong, global dairy prices, trade tensions, and inflation in input costs could still pressure margins. Fonterra has acknowledged that continued success will depend on managing input volatility and maintaining supply chain resilience.

✅ Conclusion: A Profitable Pivot in Progress

Fonterra’s latest financials underline a smart balancing act between short-term profit performance and long-term restructuring goals. With a strong dairy ingredient backbone, growing foodservice volumes, and potential for capital unlocks from divestments, the cooperative appears poised to stay agile in a complex global dairy environment.