Photo: RNZ / Cole Eastham-Farrelly
Fonterra is expected to deliver a strong full-year financial result, though all eyes will be on the outlook following the sale of its consumer brands business.
The dairy co-op recently reaffirmed its full-year earnings forecast of 65-75 cents a share for the year ended July, with analysts expecting the result to be at the top end of the range, given Fonterra's typically conservative approach to guidance.
The FY26 outlook was expected to be positive as the diary co-operative started this financial year with plenty of wins, including last month's sale of its Mainland consumer business to France's Lactalis for $4.22 billion, making it one of the largest sales in New Zealand's corporate history.
Forsyth Barr senior analyst Matt Montgomerie said the market will want more information about how the supply agreement between Lactalis and Fonterra would play out.
"They have sort of acknowledged it's a 10-year agreement, but [the business] hasn't really provided any detail," Montgomerie said.
He said the market will also want to hear more about Fonterra's plans to grow the ingredients and food services businesses.
"A bit more articulation around growth, the capital spend programme - where that's going - and the investment into ingredients and food service to drive the growth will be important."
New Zealand's first electric milk tanker: Fonterra Milk-E. Photo: Supplied / Fonterra
Fonterra also lifted its FY25 forecast Farmgate Milk Price and narrowed the FY26 forecast range last month, referring to stable global dairy trade prices, while warning of a potential for a return to volatility.
That warning appeared to be playing out in recent weeks with global dairy trade prices beginning to soften, as global production increased.
Still, the 2024/25 season forecast Farmgate Milk Price was increased to $10.15 from $10 per kgMS, with FY26 forecast range narrowing to $10.10-$10.20 from $9.70-$10.30.
Generate Wealth investment specialist Greg Smith said there were a number of questions about how the sale of the consumer business affected the outlook.
"It will be the first time that we get that FY26 earnings guidance, and it'll be the first time also excluding the consumer business," Smith said.
He said there will also be keen interest in Fonterra's dividend strategy following the sale of Mainland, in addition to the special $2 a share dividend it announced as part of the sale.
"Yeah, certainly they've had a great run this year, and if you look at the price of the co-op shares, you know they're up around about 40 percent year to date."
Fonterra is expected to announce its full year result on Thursday morning.
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