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In a detailed analysis of the result, Ms Howe said Fonterra had continued to shift volume from commodity areas towards its higher value consumer and foodservice business.
Fonterra posted normalised earnings of $607million for the six months ended January, down 9% on the previous corresponding period. The result was ahead of Forsyth Barr expectations.
Fonterra downgraded its near-term earnings-per-share expectations and the co-operative cited unfavourable relative product pricing challenges, coupled with expected margin compression and the possibility of additional late-season milk collection costs as the season finally started to ramp up year-on-year.
Notably, the co-operative left its full-year dividend forecast of 40c per share unchanged.
Ms Howe said one of the key drivers for Fonterra was global dairy prices. The global prices for Fonterra's reference commodity products dictated the farm-gate milk price (FGMP) Fonterra was required to pay its suppliers.
The differential between non-reference commodity prices - cheese and casein - and reference commodity prices could benefit or weigh on Fonterra earnings. A positive differential helped drive profits.
Fonterra was trying to drive a value-add strategy to complement its commodity operations. That was driven by offshore markets.
''Fonterra's ability to obtain market share in infant formula/maternal product lines, as well as the foodservice market, is the key to success.''
There was a disconnect between farmer shareholder and investor unit holder desires. Farmers preferred the maximisation of the FGMP while unit holders preferred a low FGMP and higher dividend as they had no access to the milk price cash flows.
And there was competition in key markets. The Chinese infant formula market was challenging.
Among the risks identified by Forsyth Barr were the challenging Australia and New Zealand operations. There remained significant work to do to turn around the operations, Ms Howe said.