New Zealand dairy giant Fonterra cautioned on Thursday that the El Nino weather pattern could curb milk production growth toward the end of the 2026/27 season, as the phenomenon heightens the risk of extreme weather events and disrupts global crop yields. El Nino arises from weakened trade winds that trigger periodic rises in sea surface temperatures across the eastern Pacific; the World Meteorological Organization predicts this event will intensify further by 2027, potentially becoming the strongest on record and likely bringing droughts and typhoons.
After factoring in the risks posed by El Nino, the world's largest dairy exporter projects underlying earnings per share for the 2027 fiscal year to fall between NZ$0.65 and NZ$0.85. The midpoint of that range sits slightly above the NZ$0.71 per share recorded in the 2026 fiscal year. Jeremy Sullivan, an investment adviser at Craigs Investment Partners, noted, "Weather is clearly a factor Fonterra cannot control. If milk production drops significantly, it will reduce the volume available for processing and sales; so I view El Nino as a major downside risk and one reason investors should remain cautious about the 2027 fiscal year outlook."
Meanwhile, bolstered by gains from the sale of Mainland Group to French dairy giant Lactalis and robust market demand for high-protein products within its ingredients division, Fonterra's after-tax profit for the 2026 fiscal year more than doubled year-on-year to NZ$2.61 billion, or approximately US$1.48 billion. As global protein demand surges with consumer preferences shifting toward healthier, more nutrient-dense foods, Fonterra has announced plans to invest NZ$1 billion over the next three years to expand its protein production network in New Zealand's South Island. These projects are expected to generate around 50 to 60 long-term jobs.
Fonterra also declared a final dividend of NZ$0.33 per share, bringing its full-year dividend total to NZ$0.73, up from NZ$0.57 in the prior fiscal year.
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