Fonterra raised its forecast payout from the decade low of $3.85 per kilogram of milk solids to $4.60, even though the majority of dairy farmers will book no profit at $4.60.
For its year to July, Fonterra this week booked a 183%, or $327million lift in profit, from $179million the previous year to $506million.
Brokers at Craigs Investment Partners and Forsyth Barr were complimentary about the ''solid result'' and ''strong performance'', but wary of the effects on the Fonterra Shareholder Fund (FSF) units in the medium term.
There are 1.59billion FSF units on issue, trading up slightly at $5.57 yesterday, giving a market capitalisation of about $8.75billion.
The units are based on Fonterra's branded products division, as opposed to sharing in farm-gate milk production.
Forsyth Barr broker Andrew Rooney said execution risk and market volatility remained the key thematics for Fonterra, following its full-year result.
''The co-operative has set ambitious targets to be achieved within the next three to five years, including increasing Ebit [earnings before interest and tax] by 50% to 100%''.
Fonterra's normalised Ebit of $974million was ''broadly in line'' with expectations while transparency into the returns generated by its different businesses was also useful, he said.
While Forsyth Barr's valuation of the FSF units had increased slightly, as Fonterra had highlighted its ability to increase its consumer and food-service volumes, the recent share price re-rating lowered expected returns, prompting a downgrade of the FSF units from ''neutral'' to ''underperform''.
He noted increased inventory volumes, up 8% according to Fonterra, plus a high receivables balance and the timing of advance rate payments to farmers had driven debt levels above $7billion.
He said the $403million in working capital savings was earmarked for first half 2016, which will be required to support the farmer loans, before any debt balances could be repaid, Mr Rooney said.
Craigs broker Paul Valk was maintaining a ''buy'' recommendation on FSF units, after the improved second-half performance, and with a strong growth outlook ''FSF has delivered a solid 2015 result, largely in line with consensus estimates, but importantly, the second-half Ebit exit run-rate was around $600million,'' he said.
''[However] the soft spot in the result was debt remains high at $7.2billion, [debt] gearing is at 50% and in part due to higher advance payments to farmers of about $900million,'' Mr Valk said.
The key negative risks included continued global dairy trade volatility, drought weather conditions and management execution of an earnings turnaround, or slowing macro conditions in key growth markets.
Mr Valk said Craigs had re-based its operating Ebit forecast higher to account for the stronger second-half performance and higher confidence that the company's strong outlook guidance could be achieved.
For 2016, Mr Valk said Craig's Ebit forecast was up from $1billion to $1.2billion, which assumes a positive growth contribution across all divisions.
