It indented to pay another 20 cents in two bites – 10 cents in May and 10 cents in August to help farmers’ cashflows.
Its forecast farmgate milk price remains at $3.90 a kilogram of milksolids.
Its earnings before interest and tax were $665 million, a rise of 77%.
“The supply and demand imbalance in the globally traded dairy market has brought prices down to unsustainable levels for farmers around the world and particularly in New Zealand,” chairman John Wilson said.
The strong New Zealand dollar also had a negative impact on the milk price.
“The low prices have placed a great deal of pressure on incomes, farm budgets and our farming families.
“Our priority is to generate more value out of every drop of our farmers’ milk by focusing on the areas within our control.
“We aim to efficiently convert as much milk as possible into the highest-returning products.
“Our management is aware of the need for strong performance to ensure that we get every possible cent back into farmers’ hands during a very tough year.
“We have lifted profitability from last season to this season, resulting in higher earnings per share to help offset low global dairy prices.
"As a result, we have delivered an interim dividend of 20 cents per share, up from an interim dividend for last year of 10 cents per share.
The forecast milk price reflected low global dairy prices, with whole milk powder decreasing about 17% this season to date.
The forecast total available for payout of $4.35-$4.45/kg MS equated to a forecast cash payout of $4.30/kg MS after retentions for a fully shared-up farmer.
The May and August payments were subject to board approval at the time and Fonterra’s financial performance continuing to support its forecast earnings per share of not less than the current 45 to 55 cents forecast range per share.
“The timing of these payments is a specific response to the current, very challenging financial conditions farmers are facing and does not signal any intention to move away from Fonterra’s normal practice of twice-yearly dividends paid in April and October,” Wilson said.
Chief executive Theo Spierings said the co-operative’s strong performance reflected a sustained effort in three main areas.
“We focused on the efficiency of our ingredients business and capturing demand for ingredients in a wide range of markets.
“We aimed to make the most of global consumption growth by building demand for higher-value products in our consumer and food service markets.
“Our working capital has improved significantly and our inventory levels are lower than in recent periods for this time of year – down 9% in volume terms due to strong sales.”
Free cashflow for the six months to January 31 was $2.1 billion higher than the first half last year, with gearing at 49%, down from 51% in the previous year.
“Finally, we maintained strict financial discipline to keep lifting our return on capital and our strong cashflow has enabled us to strengthen the co-operative and reduce gearing,” Spierings said.
“Ingredients achieved normalised EBIT of $617 million, up 27% compared to the first half last year.”
That resulted from improved product mix returns and increased production and cost efficiencies coming from investments in plant capacity in NZ.
“In consumer and food service we have delivered very good growth, with normalised EBIT increasing 108% to $241m.
“We remain focused on growing demand, especially in the eight markets where we currently hold or want to gain leadership or a very strong position: NZ, Australia, Sri Lanka, Malaysia, Chile, China, Indonesia and Brazil.
“These are well established markets for Fonterra, so we are working off a strong base.
“The additional 235 million litres of milk we converted into higher-returning consumer and food service products in this six month period built on the additional 600 million litres last year.
“Our farms in China are a key part of our integrated dairy business.
“We are achieving operational efficiencies on the farms which are helping offset the current low domestic milk price in China.”
