New Zealand's Fonterra Sees Profit Soars On Higher Margins, Hikes Dividend

By Reuters
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New Zealand's Fonterra Sees Profit Soars On Higher Margins, Hikes Dividend

New Zealand's Fonterra Co-operative Group said that its first-half profit soared, aided by higher margins and sales across a diversified product and category mix, while also declaring a bumper dividend for shareholders.

Consumer and food service earnings have benefited from improved pricing and higher sales volumes, while the ingredients segment took a hit from historically high prices in the previous year, the company said.

Shares of Fonterra Shareholders' Fund surged as much as 2.8% by 2331 GMT, while shares of the co-operative climbed 2.1%. In contrast, the broader benchmark S&P/NZX 50 index was trading down 0.2%.

Gross Margins Set To Tighten

However, the second half of the year looks bleak for the dairy co-operative, as it flagged further tightening in gross margins for ingredients, food service and consumer segments due to the recent hike in prices it pays to the farmers for milk.

Fonterra said its fiscal 2024 farmgate milk price forecast range had been narrowed to NZ$7.50-NZ$8.10 per kilogram of milk solid (kgMS) from NZ$7.30-NZ$8.30 per kgMS.


Potential Volatility

"Looking out to the remainder of the year, while global inflationary pressures are easing, we are monitoring the potential for volatility as a result of geopolitical instability," Fonterra CEO Miles Hurrell said.

The company also declared an upsized interim dividend of 15 New Zealand cents (€0.08) per share, up 50% from the 10 NZ cents (€0.06) per share declared a year earlier.

The world's biggest dairy exporter reported profit after tax of NZ$674 million (€370.70 million) for the six months ended Jan. 31, compared with NZ$546 million (€300.30 million) a year earlier.

Read More: Fonterra Hikes 2024 Earnings, Milk Price Outlook On Strong Demand

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