Fonterra shares hit early 2018 peak on record dividend, robust unit profits

Core Insights - Fonterra reported a stronger annual operating profit and declared a record full-year dividend, leading to a significant increase in its share price, reaching its highest level in over seven years [1][3]. Financial Performance - Operating profit across Fonterra's divisions increased, with the ingredients segment rising by 17.4% due to improved margins and the food service segment up nearly 9% driven by strong volumes [2]. - The consumer business saw a 16.1% increase in normalized profit from discontinued operations [2]. - Full-year net profit decreased by 4.3% to NZ$1.08 billion (approximately $627.8 million) due to higher taxes following a change in the treatment of farmer shareholder distributions [4]. Dividend and Forecast - Fonterra declared a final dividend of 35 New Zealand cents per share, bringing the total annual payout to a record 57 NZ cents, an increase from 55 NZ cents the previous year [3]. - The company raised its milk collection forecast for 2025-26 to 1,525 million kgMS, up from a previous estimate of 1,490 million kgMS, after reporting 1,509 million kgMS for the year ending July 31 [3]. Market Outlook - CEO Miles Hurrell noted that global dairy trade prices remain robust, indicating a positive market environment [3]. - However, there are concerns regarding potential volatility in commodity prices and exchange rates due to geopolitical dynamics [4]. - Fonterra anticipates normalized earnings per share for fiscal year 2026 to decline to 45-65 cents, down from 71 cents this year [4]. - An investment advisor suggested that if product mix upgrades and capacity projects are executed on time, earnings could recover to financial year 2025 levels within approximately three years [5].