By Nichiket Sunil
Sept 24 (Reuters) - New Zealand's Fonterra on Thursday warned that El Niño could affect milk volume growth at the end of the 2026/27 season, as the weather phenomenon heightens risk of extreme weather events and impacts global crop output.
El Niño — a periodic warming of sea surface temperatures in the eastern Pacific caused by weakening trade winds — is set to intensify further into 2027 and could be the strongest ever, according to the World Meteorological Organization, potentially
fueling extreme weather such as droughts and typhoons.
After factoring in El Niño risks, the world's biggest dairy exporter expects fiscal 2027 underlying earnings per share of 65 New Zealand cents to 85 New Zealand cents, the midpoint of which is slightly above the 71 NZ cents per share recorded in fiscal 2026.
"Weather is obviously something Fonterra can't control. A material reduction in milk production would affect the amount of product available to process and sell, so I think El Niño is a meaningful downside risk and one of the reasons investors should retain some caution around the FY27 outlook," said Jeremy Sullivan, an investment adviser at Craigs Investment Partners.
Meanwhile, Fonterra's profit after tax for fiscal 2026 more than doubled from a year earlier to NZ$2.61 billion ($1.48 billion), boosted by gains from the sale of the Mainland Group to French dairy giant Lactalis and strong demand for protein-rich products sold by its Ingredients business.
Shares of the dairy co-operative were up 0.4% at NZ$4.82 in early trade.
As global protein demand rises rapidly amid shifting consumer preferences toward healthier and more nutrient-dense foods, Fonterra said it would invest NZ$1 billion over the next three years to expand its protein manufacturing network in South Island. The projects are expected to create around 50 to 60 permanent roles, it said.
Fonterra also declared a final dividend of 33 New Zealand cents per share, lifting its total payout for the year to 73 NZ cents, compared with 57 NZ cents a year earlier.
($1 = 1.7618 New Zealand dollars)
(Reporting by Nichiket Sunil and Anjali Singh in Bengaluru; Editing by Jonathan Ananda)
