Fonterra Expands Organic Dairy Programme Into South Island
Fonterra has announced it will continue with the planned expansion of its organic business into the South Island.
Today, the co-operative released its third quarter business update, which revealed a Total Group operating profit of $1.8 billion for the year-to-date, up $103 million on the same time in 2025.
Higher Farmgate Milk Price Amid Strong Sales Performance
The forecast Farmgate Milk Price midpoint for the current season is unchanged at $9.70 per kgMS, with the range narrowing to $9.60-$9.80 per kgMS.
The Co-operative has also announced an opening forecast Farmgate Milk Price for the 2026/27 season of $9.75 with a range of $8.00-$11.00 per kgMS to reflect potential impacts across the season from ongoing geopolitical risks and inflationary pressures.
Richard Allen, who took over as Fonterra's chief executive earlier this month, says strong milk production and high shipment volumes have underpinned the result.
"Milk production is up considerably this season, and despite disruption in global supply chains, our sales book is well contracted and our shipping volumes are strong, with the highest third quarter shipment volumes in a decade," Allen says.
“As we look ahead to next season, we expect milk collections to remain high, in line with this season. Our in-market sales teams are anticipating solid demand from across the regions despite potential volatility, and this is reflected in our opening forecast range."
Profit Growth Driven By Ingredients and Foodservice
A disciplined focus on strategy has driven a Total Group year to date operating profit of $1.8 billion, up from $1.7 billion the prior year, and profit after tax of $1.1 billion, equivalent to 65 cents per share.
Adjusting for Mainland’s result to reflect the Co-operative's underlying business, the Co-op delivered $946 million profit after tax, equivalent to earnings per share of 57 cents, up from 53 cents this time last year.
The Ingredients business benefited from ongoing protein demand in the US and Europe, while Foodservice continued to achieve both volume and margin growth.
Mainland Sale Supports Strategic Shift
Allen says the Co-op is committed to delivering on its strategy and growing value for farmer owners as a global B2B dairy provider.
“During the quarter, we completed the sale of Mainland Group and returned $3.2 billion to shareholders and unit holders," he says.
"This marked a significant step in the delivery of our strategy, with the Co-operative firmly focused on growing our high-value Ingredients and Foodservice businesses."
Major Investments Progressing
Allen says the co-operative has advanced work on its $35 million pastry butter sheet capacity at Edgecumbe.
The co-operative has also reached the product validation stage on its $75 million Studholme protein hub, and progressed on its $75 million butter expansion at Clandeboye and $150 million UHT cream build at Edendale.
“I’m also pleased to announce that we’ll be progressing with the planned expansion of our organic business into the South Island, following strong interest from farmers wanting to join our successful organic programme," Allen says.
The co-operative has also declared a forecast Organic Milk Price range of $13.90 - $14.10/kgMS, with a record midpoint of $14/kgMS.
"Our opening forecast for the 2026/27 season is $13.00 - $15.00 per kgMS, also with a $14.00 per kgMS midpoint, reflecting the value customers see in our organic farmers’ milk," Allen says.
“These initiatives all reflect real momentum in the Co-op’s performance as we head into the final quarter of the financial year.”
Outlook Remains Positive Despite Global Uncertainty
Allen says that looking ahead, Fonterra has strong foundations and a clear strategy to deliver value through its Ingredients and Foodservice businesses.
"Our full year earnings guidance reflects the strong shipment volumes expected in the final quarter of the year," he adds.
“However, we acknowledge the uncertainty caused by the ongoing conflict in the Middle East. Like our farmers, and others around the world, we are experiencing cost inflation and shipping disruptions.
“We are confident that our deep relationships with customers and logistics partners will continue to help us navigate these challenges,” Allen concludes.
