New Zealand Dairy Giant Fonterra Boosts Profit Forecast Despite Middle East Concerns

Fonterra Co-operative Group, the world's largest dairy exporter, increased its annual earnings projection after reporting higher half-year profits. The New Zealand-based company warned that ongoing Middle East conflicts could affect supply chains and drive up costs.

New Zealand’s largest dairy company has increased its annual profit forecast following stronger-than-expected half-year results, though executives are keeping a close eye on potential disruptions from Middle East conflicts.

Fonterra Co-operative Group announced Monday it was raising its full-year earnings projection for ongoing operations to 50-65 New Zealand cents per share, an improvement from the previous range of 45-65 cents.

The world’s largest dairy exporter reported after-tax profits of NZ$750 million (US$436 million) for the six-month period ending January 31, marking a 3% increase from NZ$729 million during the same period last year.

Company officials cited improved global commodity pricing, strong profit margins, and effective cost management as key factors behind the upgraded outlook.

However, Fonterra warned that ongoing conflicts in the Middle East could lead to higher inventory levels and increased expenses during the second half of the year, potentially adding volatility to worldwide commodity markets.

The company’s stock price dropped 0.2% to NZ$6.21 during early trading following the announcement.

Fonterra announced an interim dividend payment of 24 New Zealand cents per share, up from 22 cents the previous year. The company also confirmed a special Mainland dividend of 16 cents per share, representing the full fiscal 2026 earnings from that division while it remains under company control.

Performance gains were driven by growth in premium market segments, with the ingredients division achieving an 11% return on capital and the food service channel reaching 12.6%, bolstered by strong protein product sales and better pricing strategies.

“The company looks to be benefiting from solid demand conditions and good execution, while the Middle East remains an important watchpoint rather than something that has derailed the story,” said Jeremy Sullivan of advisory firm Hamilton Hindin Greene.

The dairy cooperative also increased its annual forecast for farmgate milk prices – what it pays farmers for their milk – to NZ$9.40-NZ$10.00 per kilogram of milk solids, up from earlier projections of NZ$9.20-NZ$9.80 per kilogram.

Chief Executive Miles Hurrell noted that robust milk production, including record output from New Zealand’s South Island, combined with challenging weather conditions, had created operational pressures, though the company successfully managed these impacts.

Fonterra has agreed to sell its global consumer and related business operations to French dairy company Lactalis, with the transaction expected to close by the end of March 2026.