The dairy giant said its return on capital was 13.4 per cent, up from 8.6 per cent in the previous corresponding half.
“While supply and demand dynamics remain finely balanced, with continuing global uncertainty, we are now well progressed through the season,” chief executive Miles Hurrell said.
“This gives us the confidence to narrow our forecast farmgate milk price range to $7.50- $8.10 per kgMS,” he said.
The co-op’s earnings before interest and tax was up 14 per cent to $986m.
Fonterra said higher margins and sales volumes from its foodservice and consumer channels helped to offset lower returns in the ingredients channel.
“At the same time, our balance sheet position remains resilient, with our strong underlying performance and low debt position helping to further lower our financing costs this year,” Hurrell said.
The co-op said it was focused on reducing costs across the business.
Fonterra’s consumer and foodservice earnings were up year-on-year, due to improved pricing and higher sales volumes.
“Ingredients channel earnings are down year-on-year off the back of historically high price relativities in 2023 and lower margins in Australia Ingredients during 2024.”
The higher Australian milk price impacted Fonterra Australia’s performance.
Last month, Fonterra announced plans to merge its Australia and Fonterra Brands New Zealand businesses from May 1.
“These two units share many similarities, and we expect the integration to create scale efficiencies,” Hurrell said.
Fonterra’s Greater China division’s profit after tax was up $94m at $232m, primarily due to strong performance in the foodservice channel.
In his outlook, Hurrell said: “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.”
Hurrell said through Fonterra’s partnership with logistics firm Kotahi and diversification across markets, the co-op was well prepared for disruption in global supply chains or changes in demand from key importing regions.
In a results conference call, Hurrell said Asia – excluding China – was a significant source of increased demand over the second quarter.
In recent Global Dairy Trade (GDT) auctions, China, once a major source of demand for milk powder, has been much less dominant.
Hurrell said that a recovery in China would be an important factor in future GDT pricing.
“In the second half, we are expecting pressure on margins in Foodservice and Consumer from the higher cost of goods – the price of milk,” he said.