This week Fonterra announced some key figures, which continues to drive positivity in New Zealand's leading sector for economic recovery.
FY25 Adjustment
- The midpoint forecast for the 2024/25 season has been increased from NZ$10.00 to NZ$10.15 per kg of milk solids (kgMS).
- The forecast range has also significantly tightened — previously $9.70–$10.30, now narrowed to $10.10–$10.20.
With September and October always a tight period for cashflow for Dairy farmers, as calving ramps up and spring milking kicks off. Residual payments play an important role in balancing the books heading into the season ahead, this lift in midpoint provides a welcome boost at the farm gate.
FY26 Forecast Confirmation
- The opening forecast for the 2025/26 season remains at NZ$10.00 per kgMS.
- The range has been refined from $8.00–$11.00 to $9.00–$11.00.
Fonterra Shareholders Earnings Forecast
- The FY25 earnings guidance remains steady at 65–75 NZ cents per share, announced prior to the deal for its consumer brand.
Sale of Global Consumer Brand
- Fonterra announced the sale of its Consumer and associated businesses to Lactalis, a French multinational dairy products corporation for $3.845 billion NZD. Fonterra is targeting a tax free capital return of $2.00 per share, over and above the normal earnings forecast. The sale includes long-term agreements for Fonterra to sell milk and ingredients to the purchaser, keeping milk demand in New Zealand. The sale is expected to take place in Q1 of 2026.
- Fonterra Coop (FCG) shares closed at $6 (+19.52% for the day), with the Shareholders Fund (FSF) closing at $7.15 (+2.73% for the day).
OCR Announcement
- The decision to lower the OCR by -25 basis points to 3.00% was welcome news for many around the country. Of equal importance was the Reserve Bank's tone, signalling that further cuts are likely, with some policymakers favouring a larger 50-basis-point reduction.
- The move saw the NZD down against the USD, down -1.94% this week. With the Agri sector's reliance on imports for things like fertiliser and fuel, cost base increases may come into play, however the weaker dollar will benefit export demand from global buyers.
If you would like to discuss these results, or to discuss how Agricultural investments might work for you, please feel free to reach out to the team at Seedling today.