Fonterra Shareholders' Fund (NS) Analysis

Overview

The Fonterra Shareholders' Fund (FSF) is a registered managed investment scheme under the Financial Markets Conduct Act 2013. The FSF provides investors an opportunity to invest in the performance of Fonterra Co-operative Group Limited (Fonterra). Outside investors who are not allowed to hold shares in Fonterra can invest in units in the FSF which gives them access to economic rights (such as distributions and capital movements), similar to those of a share. The Manager of the FSF is FSF Management Company Limited.

Fonterra is a dairy co-operative, owned and supplied by nearly 9,000 farming families in Aotearoa, New Zealand. Through the spirit of co-operation and a can-do attitude, Fonterra’s farmers, along with 20,000 employees around the world, share the goodness of our milk through innovative consumer, foodservice and ingredient brands. Sustainability is at the heart of everything we do, and we’re committed to leaving things in a better way than we found them. Everyday people working hard to be Good Together in the community.

The FSF has been granted Listing with a 'Non-Standard' ("NS") designation. This designation was granted because of the unique governance arrangements and unit holder restrictions. For further information, please see a copy of the waiver under Documents on FSF's homepage on nzx.com.

Performance

The following information was extracted from Fonterra Co-operative Group Limited's (NS) market update, released 29 May 2025:

Fonterra announces 2025/26 Farmgate Milk Price, Q3 earnings

· Normalised* profit after tax: NZ $1,158 million, up 11%

· Normalised continuing earnings per share: 70 cents per share, up 13%

· Return on capital: 11% down from 11.9%

· FY25 full year forecast earnings range: 65-75 cents per share

· 2024/25 season forecast Farmgate Milk Price: $10.00 per kgMS

· 2025/26 season opening forecast Farmgate Milk Price: $10.00 per kgMS

Fonterra Co-operative Group Ltd today provided its Q3 business update, announcing strong profit after tax of $1,158 million, up $119 million on this time last year.

As a result of these strong earnings, the Co-op narrowed its year-end earnings range to 65-75 cents per share, at the upper end of the guidance provided in March of 55-75 cents per share.

At the same time, Fonterra announced an opening forecast Farmgate Milk Price for the 2025/26 season of $10.00 per kgMS, driven by stable near-term market demand.

Business performance

Fonterra’s focus on optimising its product mix has driven a Q3 normalised profit after tax of $1,158 million, equivalent to 70 cents per share, with operating profit of $1,740 million, up $267 million on last year.

“This result reflects the scale and ongoing strength of our Ingredients channel, and volume growth in our Foodservice and Consumer channels with each channel increasing its third quarter performance compared to the same period last year.

“Our rolling 12-months Return on Capital is 11%, which is above our previous target for FY25 and within our long-term target range of 10-12%,” says Mr Hurrell.

“Our full year forecast earnings range of 65-75 cents per share assumes flat earnings in Q4 of FY25 due to the seasonality of our milk collections, the higher input prices for our Consumer and Foodservice businesses, ongoing investment in our ERP system and an increase in costs associated with shaping the Co-op post divestment to execute our strategy.