(Bloomberg) -- Fonterra Cooperative Group, the world’s biggest dairy exporter, paid New Zealand farmers less for their milk this year but was able to soften the blow by increasing dividends even as earnings declined.
Net income fell 28% to NZ$1.13 billion ($716 million) in the year ended July 31, the Auckland-based company said Wednesday. Still the dairy group was able to increase its dividend to 55 cents a share from 50 cents a year earlier by providing a 15 cents special dividend.
“Our total dividend is the second largest since Fonterra was formed,” Chief Executive Officer Miles Hurrell said. “Our capital management efficiency and ongoing balance sheet strength have enabled us to return an extra 15 cents per share to farmer shareholders and unit holders through a special dividend.”
Shares of the Fonterra Shareholders Fund, which tracks the cooperative’s earnings and dividends, rose 3.5% to NZ$4.69 at 10:15 a.m. in Wellington.
China’s slower economic growth hit global dairy prices, reducing Fonterra’s milk payment to its farmers to NZ$7.83 per kilogram of milksolids from NZ$8.22 in the previous season. But most farmers will receive the full dividend, lifting their total cash income.
In addition, Fonterra today projected the 2024-25 season milk price could be NZ$9 per kilogram, a 50 cent increase on its forecast little more than a month ago.
The improved outlook follows further recent strengthening in global dairy trade auction prices and constrained milk supply in key producing regions, Hurrell said.
Operating profit fell 11%, led by a sharp drop in earnings in the ingredients business. The favorable margins in value-added businesses such as proteins and cheeses didn’t repeat, Hurrell said. Foodservice and Consumer unit profits improved.
The company in May said it may sell the consumer business, and that work is ongoing, Hurrell said today.
“The businesses in scope for potential divestment are performing well.” he said. “We remain committed to a pathway that would maximize value of these businesses for our farmer shareholders and unit holders.”
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