Q4 2026 Fonterra Co-Operative Group Ltd Earnings Call
Speaker #1: Thank you for standing by, and welcome to the Fonterra FY26 full-year results briefing. All participants are in listen-only mode. There will be opening remarks followed by a question-and-answer session.
Operator 2: Thank you for standing by, and welcome to the Fonterra FY26 full year results briefing. All participants are in a listen-only mode. There will be opening remarks followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Richard Allen, CEO. Please go ahead.
Operator: Thank you for standing by, and welcome to the Fonterra FY 2026 Full-Year Results Briefing. All participants are in a listen-only mode. There will be opening remarks followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Richard Allen, CEO. Please go ahead.
Speaker #1: If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Richard Ellen, CEO.
Speaker #1: Please go ahead.
Speaker #4: Thank you, and good afternoon. Thank you very much for taking the time to join us this afternoon. With me today is Andrew Murray, our Chief Financial Officer, and his team.
Richard Allen: Thank you, and good afternoon, and thank you very much for taking the time to join us this afternoon. With me today is Andrew Murray, our Chief Financial Officer, and his team. I am hoping you have all had the chance to watch the video and read through the results we released this morning. We will not go through those. I think we wanted to maximize time for questions. I will hand back to you, to guide us through the questions.
Richard Allen: Thank you, and good afternoon, and thank you very much for taking the time to join us this afternoon. With me today is Andrew Murray, our Chief Financial Officer, and his team. I am hoping you have all had the chance to watch the video and read through the results we released this morning. We will not go through those. I think we wanted to maximize time for questions. I will hand back to you, to guide us through the questions.
Speaker #4: I'm hoping you've all had the chance to watch the video and read through the results we released this morning. We won't go through those.
Speaker #4: I think we wanted to maximize time for questions, so I'll hand back to you to guide us through the questions.
Speaker #1: Thank you. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press *2.
Operator 2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Will Twiss with Forsyth Barr. Please go ahead.
Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Will Twiss with Forsyth Barr. Please go ahead.
Speaker #1: If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Will Twist at Forsyth Barr.
Speaker #1: Please go ahead.
Speaker #4: Good morning, guys, and congratulations on the strong result. If we look at the FY26 result, obviously some good progress operationally, but you did benefit from some quite favourable stream returns as well.
Will Twiss: Good morning, guys, and congratulations on the strong result. If we look at the FY 2026 result, obviously some good progress operationally, but you did benefit from some quite favorable stream returns as well. If we think about your guidance for next year, where do these stream returns need to land for you to hit the middle or the top end of your guidance? Is the right way to think about it that if stream returns kind of stay where they are today, you should be tracking towards the top end of that guidance range that you have put out there?
Will Twiss: Good morning, guys, and congratulations on the strong result. If we look at the FY26 result, obviously some good progress operationally, but you did benefit from some quite favorable stream returns as well. If we think about your guidance for next year, where do these stream returns need to land for you to hit the middle or the top end of your guidance? Is the right way to think about it that if stream returns kind of stay where they are today, you should be tracking towards the top end of that guidance range that you have put out there?
Speaker #4: If we think then about your guidance for next year, where do these stream returns need to land for you to hit the middle or the top end of your guidance?
Speaker #4: Is the right way to think about it that if stream returns kind of stay where they are today, you should be tracking towards the top end of that guidance range which you've put out there?
Speaker #5: Yeah. Look, I think what we would say is that if we are similar to what we saw in Q4 2026, then we're tracking towards that midpoint of where that range sits out.
Richard Allen: Yeah, look, I think what we would say is that if we are similar to what we saw in 2026, then we are tracking towards that midpoint of where that range sits out. Obviously, if you look at where those relativities are sitting right now, it is a little bit more favorable than that, but we do expect a bit of reversion in the back half. Yeah, I would track it that way as heading towards the midpoint. Then we are probably in the same place we were this year.
Andrew Murray: Yeah, look, I think what we would say is that if we are similar to what we saw in 2026, then we are tracking towards that midpoint of where that range sits out. Obviously, if you look at where those relativities are sitting right now, it is a little bit more favorable than that, but we do expect a bit of reversion in the back half. Yeah, I would track it that way as heading towards the midpoint. Then we are probably in the same place we were this year.
Speaker #5: Obviously, if you look at where those relativities are sitting right now, it's a little bit more favorable than that, but we do expect a bit of reversion in the back half.
Speaker #5: So yeah, I would track it that way as heading towards the midpoint. Then we're probably in the same place we were this year.
Speaker #4: Okay, great. That's helpful. And then, just on returns: the business has been targeting a return on capital of 10 to 12 percent, but obviously the number for FY26 was a decent amount higher than that.
Will Twiss: Okay, great. That is helpful. Then just on returns, so the business has been targeting a return on capital of 10% to 12%, but obviously the number for FY 2026 was a decent amount higher than that. Acknowledging that there has been some tailwinds from stream returns, as we have spoken about, has there been any change to the sustainable level of returns on capital you think Fonterra can deliver going forward?
Will Twiss: Okay, great. That is helpful. Then just on returns, so the business has been targeting a return on capital of 10% to 12%, but obviously the number for FY26 was a decent amount higher than that. Acknowledging that there has been some tailwinds from stream returns, as we have spoken about, has there been any change to the sustainable level of returns on capital you think Fonterra can deliver going forward?
Speaker #4: Acknowledging that there have been some tailwinds from stream returns, as we've spoken about, has there been any change to the sustainable level of returns on capital that you think Fonterra can deliver going forward?
Speaker #5: Look, we said when we put out the 10 to 12, that that was a post-mean-land average. I think that's the way for us to think about that.
Andrew Murray: Look, we said when we put out the 10 to 12 that was a post-Mainland average, I think is the way for us to think about that. We'd much rather be at the top end of that range. Have a few tailwinds through FY 2026, but we also have some other investment to do as well, which we announced that today as well. I think we're in a space where certainly the top end of that range is where we would like to be. Some years we're going to be a bit ahead of that if we've got some relativities tailwinds, and then sometimes it might be a little bit below that. But we're not changing the 10 to 12 in terms of our ongoing outlook.
Richard Allen: Look, we said when we put out the 10 to 12 that was a post-Mainland average, I think is the way for us to think about that. We'd much rather be at the top end of that range. Have a few tailwinds through FY26, but we also have some other investment to do as well, which we announced that today as well. I think we're in a space where certainly the top end of that range is where we would like to be. Some years we're going to be a bit ahead of that if we've got some relativities tailwinds, and then sometimes it might be a little bit below that. But we're not changing the 10 to 12 in terms of our ongoing outlook.
Speaker #5: And, obviously, we'd much rather be at the top end of that range. We have a few tailwinds through 2026, but we also have some other investment to do as well, which, obviously, we announced that today as well.
Speaker #5: So I think we're in a space where certainly the top end of that range is where we would like to be. Some years we're going to be a bit ahead of that if we've got some relativity tailwinds, and then sometimes it might be a little bit below that.
Speaker #5: But we're not changing the 10 to 12 in terms of our ongoing outlook.
Speaker #4: Okay, great. And then just one last question from me: What kinds of things are you seeing in terms of disruption to the supply chain, given the situation that's still ongoing in Iran and the Middle East?
Will Twiss: Okay, great. Then just last one from me. What kind of things are you seeing in terms of disruption to the supply chain, given the situation that's still going on in Iran and the Middle East?
Will Twiss: Okay, great. Then just last one from me. What kind of things are you seeing in terms of disruption to the supply chain, given the situation that's still going on in Iran and the Middle East?
Speaker #5: Yeah, so I think if we look at that, we've done pretty well in terms of actually getting product up to the Middle East and actually into customers' hands.
Andrew Murray: Well, I think if we look at that, we've done pretty well in terms of actually getting product up to the Middle East and actually into customers' hands. If you look a little bit of sales phasing this year, well, I'll say this year, in FY 2026, you'll have noticed a little bit more into the back half. So we definitely had some delays as we saw that play out. So it's taking a little bit longer for our product to get up there. But we are now reliably getting product up and through into the Middle East. So we're feeling pretty good about that. The relationship that we have with Kotahi, which is a joint venture we have with Silver Fern Farms, that has given us really good access to shipping, and that's really allowed us to continue to get product where it needs to go.
Richard Allen: Well, I think if we look at that, we've done pretty well in terms of actually getting product up to the Middle East and actually into customers' hands. If you look a little bit of sales phasing this year, well, I'll say this year, in FY26, you'll have noticed a little bit more into the back half. So we definitely had some delays as we saw that play out. So it's taking a little bit longer for our product to get up there. But we are now reliably getting product up and through into the Middle East. So we're feeling pretty good about that. The relationship that we have with Kotahi, which is a joint venture we have with Silver Fern Farms, that has given us really good access to shipping, and that's really allowed us to continue to get product where it needs to go.
Speaker #5: If you look a little bit at our sales phasing this year—I'll say this year in 2026—you will have noticed a little bit more into the back half, so we definitely had some delays as we saw that play out.
Speaker #5: It’s taking a little bit longer for our product to get up there, but we are now reliably getting product up and through into the Middle East.
Speaker #5: So we're feeling pretty good about that. The relationship that we have with Qatar here, which is a joint venture we have with Silver Fern Farms, has given us really good access to shipping.
Speaker #5: And that's really allowed us to continue to get product where it needs to go. So, it's taking a little bit longer, it's a little bit more expensive, but we are reliably getting product up there.
Richard Allen: So we're taking a little bit longer, it's a little bit more expensive, but we are reliably getting product up there.
Andrew Murray: So we're taking a little bit longer, it's a little bit more expensive, but we are reliably getting product up there.
Speaker #4: Great. Thanks, guys.
Will Twiss: Great. Thanks, guys.
Will Twiss: Great. Thanks, guys.
Speaker #1: Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. We'll now pause for a short moment to allow any further questions to register.
Operator 2: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause a short moment for any further questions to register. Once again, if you wish to ask a question, please press star one. There are no further questions at this time. I will now hand back to Richard Allen for closing remarks.
Operator: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We will now pause a short moment for any further questions to register. Once again, if you wish to ask a question, please press star one. There are no further questions at this time. I will now hand back to Richard Allen for closing remarks.
Speaker #1: Once again, if you wish to ask a question, please press star 1. There are no further questions at this time. I'll now hand back to Richard Allen for closing remarks.
Speaker #4: Well, thanks very much for joining us. For those who haven't had the time to digest the results, as always, please reach out to the Investor Relations team.
Richard Allen: Well, thanks very much for joining us. Perhaps those that maybe haven't had the time to digest the results, as always, please reach out to the investor relations team. We would be happy to set up a call and talk you through it. Hope you all have a great day, and thanks for coming along.
Richard Allen: Well, thanks very much for joining us. Perhaps those that maybe haven't had the time to digest the results, as always, please reach out to the Investor Relations team. We would be happy to set up a call and talk you through it. Hope you all have a great day, and thanks for coming along.
Speaker #4: We'd be happy to set up a call and talk you through it. Hope you all have a great day and thanks for coming along.
