New Zealand’s dairy giant Fonterra has reported a robust first half of FY26, with total group revenue reaching NZ$13.9 billion and operating profit climbing to NZ$1,231 million. The co-operative has raised its farmgate milk price forecast and announced significant dividends for shareholders, whilst progressing major capacity expansion projects across its processing network.
Fonterra Co-operative Group Ltd. released its interim results showing continued momentum, with revenue up NZ$1.3 billion compared to the same period last year. Profit after tax reached NZ$750 million, translating to earnings per share of 45 cents, up from 44 cents in the prior year.
The co-operative announced an interim dividend of 24 cents per share, fully imputed from continuing operations, alongside a special Mainland dividend of 16 cents per share representing 100% of Mainland Group’s FY26 earnings while under Fonterra ownership.
Fonterra is advancing several capacity expansion projects across New Zealand to meet growing demand for high-value proteins, butters and creams. Photo: Misset
Raised forecasts
Fonterra has lifted its forecast farmgate milk price midpoint for the season from NZ$9.50 per kgMS to NZ$9.70 per kgMS, with the range now set at NZ$9.40-$10.00 per kgMS. The co-operative has also adjusted its full-year earnings guidance for continuing operations from 45-65 cents per share to 50-65 cents per share.
CEO Miles Hurrell attributed these improvements to global commodity price gains and strong underlying margins. “The underlying performance of Fonterra’s continuing business is stable, allowing the co-op to return all earnings associated with the Mainland Group business and lift our forecasts for the remainder of the year ahead. Demand for our products is strong, and we’re focused on our plan to maximise both the farmgate milk price and earnings,” he said.
The co-operative delivered a return on capital of 11.2%, up from 10.4% last year and within its target range of 10-12%.
Record milk volumes
The first half of the year saw record milk collections in the South Island, with forecast volumes for the season reaching 1,565 million kgMS, up 4% on the previous year. However, these strong milk flows, combined with several adverse weather events, placed pressure on all New Zealand milk processors.
“We have been able to navigate through these challenges due to the resilience of our network,” said Hurrell. “Our performance shows that we are growing the high-value parts of our business through optimal allocation of milk solids across our product mix, which is driving a strong return on capital for shareholders and unit holders.”
The Ingredients business delivered a return on capital of 11%, whilst Foodservice achieved 12.6%, driven by the protein portfolio and improved pricing that successfully recovered higher butter and cream input costs from the previous year.
Manufacturing expansion progresses
Fonterra is advancing several capacity expansion projects across New Zealand to meet growing demand for high-value proteins, butters and creams:
– Studholme – Construction of the new advanced protein hub is complete, with first trial products off the line in February 2026.
– Clandeboye – Butter plant expansion commenced in January 2026, with product expected in April 2027.
– Edendale – New UHT cream plant construction is underway, on track for late 2026.
– Edgecumbe – A NZ$35 million investment in expanding the pastry butter sheet line, with site works begun in March 2026 and production expected in April 2027.
The co-operative’s decarbonisation programme continues across key sites at Whareroa, Edgecumbe, Waitoa, and Edendale to secure energy supply, reduce emissions, and support future processing growth.
Grow value for farmers
Fonterra has made significant progress on divesting its global consumer and associated businesses, Mainland Group, to Lactalis for NZ$4.22 billion. The transaction is unconditional and expected to complete at the end of March 2026, with a NZ$2.00 per share capital return targeted for payment on 14 April.
“Our focus now is firmly on our strategy to grow value for farmers as a global B2B dairy nutrition provider, working closely with customers through our high-performing Ingredients and Foodservice channels,” said Hurrell.
The co-operative has also made it easier for new farmer suppliers to join through changes to shareholding requirements, offering greater flexibility in investment levels.
Middle East conflict poses supply chain risks
Looking ahead, ongoing conflict in the Middle East is affecting Fonterra’s supply chain and could increase inventory levels and costs during the second half of the year. Global commodity price volatility also remains a concern.
“The conflict is a complex and dynamic situation that is changing daily, but we are confident that we’re on the right track to get product to customers. Our business is designed to manage volatility. Our scale and strong relationships with customers and logistics provider Kotahi will help us to navigate through these challenges better than most,” said Hurrell.
Zana van Dijk
Source: dairyglobal (25/03/2026)
