New Zealand’s dairy industry is seeing strong financial momentum from two of its major players, Fonterra and Synlait, as they head into the latter half of the 2025 financial year.
Fonterra has upgraded its earnings guidance and reaffirmed its commitment to strong dividend payouts, while Synlait appears to be on track for a long-awaited return to profitability.
Fonterra Raises Earnings Outlook and Dividend Prospects
Fonterra Co-operative Group has increased its full-year earnings guidance for FY25, raising expectations from 40-60 cents per share to 55-75 cents per share. The decision, announced ahead of its interim results on March 20, reflects strong performance in its core Ingredients business and steady resilience in the Consumer channel.
CEO Miles Hurrell highlighted the significance of the earnings upgrade, noting that it comes alongside a Farmgate Milk Price midpoint forecast of NZD 10.00 per kgMS, a positive sign for farmer shareholders. “This upgrade reflects the underlying strength of our core Ingredients business and the resilience in our Consumer channel, which is contributing to a robust result for businesses in the divestment perimeter,” Hurrell said.
Fonterra’s dividend policy remains consistent, with 60-80% of full-year earnings earmarked for distribution. The company has confirmed that up to 50% of that payout will be made as an interim dividend, with details to be finalised later this month.
Synlait Signals Financial Turnaround
Canterbury-based Synlait Milk, which has struggled in recent years, is now projecting a return to profitability. The company has forecasted earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZD 58 million to NZD 63 million for the half-year, marking a significant improvement.
Key to Synlait’s recovery has been its focus on cost-cutting and operational efficiency. The company has reduced consultancy fees and streamlined its operations to improve asset utilisation. These measures appear to be paying off, as analysts have noted that the turnaround has been faster than expected.
A critical factor in maintaining stability has been Synlait’s competitive milk pricing. The company has set its base milk price at NZD 10 per kgMS, aligning with Fonterra, while also offering additional premiums to retain suppliers in the South Island. Farmer confidence has grown, with cease notices for suppliers now expected to be withdrawn by the end of March.
Looking ahead, Synlait has hinted at new business developments in the advanced nutrition sector. However, market watchers remain cautious, noting potential risks, including a2 Milk’s potential move toward vertical integration, which could impact Synlait’s long-term supply agreements.
Industry Trends and Market Confidence
The positive financial results from both companies come as dairy prices remain high, aided by a weak New Zealand dollar. Analysts from Forsyth Barr described the current market conditions as an “unusual positive combination,” with strong dairy prices, favourable exchange rates, and solid local production levels. However, they also cautioned that China’s demand for dairy imports remains sluggish due to ongoing oversupply and weak domestic consumption.
Despite these uncertainties, investor sentiment has been strong. Fonterra’s upgraded earnings guidance and stable dividend outlook have reinforced confidence in its financial strategy. Meanwhile, Synlait’s restructuring efforts have led to a gradual recovery in its share price.
Both companies are expected to continue focusing on high-value dairy products and efficiency improvements to drive future growth. Sustainability initiatives and market expansion into premium nutrition products are also likely to shape their long-term strategies.
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