Fonterra’s ingredients and food service business made $1.3 billion in underlying profit, up from about $1 billion last year.

Dr Nic Lees, Senior Lecturer in the Department of Agribusiness and Markets at Lincoln University, says the $2.6 billion headline figure includes $1.3 billion from an accounting revaluation of the consumer business.

He says food service demand was good, so Fonterra pushed more milk into it at much higher margins. Lower milkfat prices also cut input costs.

Fonterra has sold assets and paid equity to farmers, so returns on equity, capital and assets are higher.

“Fonterra’s profit has to come from achieving returns above the commodity price.”

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