Fonterra Co-operative Group (FCG) Q1 2025 earnings summary

Executive summary

• Q1 profit after tax was $263m, down from $346m year-over-year, with EPS at 16c versus 20c, mainly due to lower sales volumes and higher milk costs.

• Strategic focus on Ingredients and Foodservice, with site expansions and innovation in UHT cream for Greater China.

• Progress on sustainability, including ending coal use in the North Island.

• Divestment options for global Consumer business and integrated businesses in Oceania and Sri Lanka are being pursued.

• Significant investments announced: $75m for high-value protein ingredients, $150m for a new UHT cream plant, and $150m for a new cool store at Whareroa.

Financial highlights

• Operating profit (EBIT) from continuing operations was $396m, down from $575m year-over-year.

• Revenue increased 5% to $5.2b, but gross profit fell 13% to $925m due to higher cost of goods sold.

• Operating expenses rose 10% to $575m, reflecting increased IT & Digital transformation spend.

• Free cash flow remained negative at $(517)m.

• Gross margins impacted by higher milk costs but partially offset by improved product mix and greater allocation to higher value Foodservice and Consumer products.

Outlook and guidance

• Full-year FY25 forecast earnings per share maintained at 40–60c.

• Farmgate Milk Price forecast raised to $9.50–$10.50 per kgMS, midpoint $10.00, supported by strong demand and well-contracted sales.

• Outlook reflects stable underlying operating profit, offset by higher milk costs and increased IT investment.

• Focus remains on maintaining financial performance momentum during the divestment process.

• Continued investment in IT, digital infrastructure, and transformation initiatives expected.