New Zealand dairy giant Fonterra whips up bumper profit

[WELLINGTON] New Zealand dairy giant Fonterra posted a 65 per cent rise in annual net profit Thursday, despite "challenging" conditions in the global market.

Fonterra, the world's largest dairy exporter, said net profit for the 12 months to July 31 was NZ$834 million (S$830 million), up from NZ$506 million the previous year.

Chairman John Wilson said there were signs dairy prices were recovering after slumping to a 13-year low in 2015 but the market remained volatile.

"The 2015/16 season has been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels," he said.

Fonterra has responded by cutting costs, including slashing more than 750 jobs, and attempting to add value to the product it receives from its 10,000-plus farmers.

"We are moving more milk into higher-returning consumer and food service products," Mr Wilson said.

Fonterra said its revenue was down nine per cent at NZ$17.2 billion, despite sales volumes rising four per cent.

It announced a final dividend of 40 cents a share and lifted its 2016/17 milk price forecast - the amount it pays its farmers - to NZ$5.25 a kilogram, up 65 NZ cents.

A payout of NZ$5.00 a kilogram is generally considered break-even for farmers.

Demand in recent years has been hit by factors such as a slowdown in China, turmoil in the Middle East and falling prices.

Prices have risen slightly recently and Wilson pointed to a cautiously optimistic outlook.

"Current global milk prices remain at unrealistically low levels, but as the signs in the market improve, we are very strongly positioned to build on a good result in the year to come," he said.

The Fonterra Shareholders' Fund edged up 0.17 per cent to NZ$5.94 on the New Zealand stock exchange after the announcement.

AFP