Fonterra Co-op has revised its 2025-2030 strategy with the updates aimed at streamlining the business and returning more earnings to shareholders through dividends.

The co-op announced that dividend policy will be updated to return between 60% and 80% of earnings to shareholders while it has also hiked its targeted return on capital to 10%-12%, up from a five-year average of 8.6%. It remains the plan to sell Fonterra’s consumer businesses, which would allow further returns to shareholders.

Shares in Fonterra, which trade on New Zealand’s stock exchange, have increased by 14% following this announcement and the co-op’s annual results which were published on 25 September. Those results showed a small decrease in profit after tax to NZ$1.13bn (€642m).

The final milk price for the 2023/2024 season came in at NZ$7.83(€4.45)/Kg MS and the co-op raised its forecast for the 2024-2025 season to a new midpoint of NZ$9 (€5.11)/Kg MS.

On the update to the strategic review, CEO Miles Hurrell said: “We are clear on the parts of the business that create the most value today and where there is further headroom for growth. These are our innovative ingredients and food service businesses.”

He added that by “streamlining the co-op” to focus on these areas Fonterra can grow greater value for shareholders even if the consumer businesses are sold.

The co-op aims to further increase its presence in the market for sophisticated dairy ingredients while also concentrating on its food service business in China and other key markets.

Fonterra said that it will provide farmers with an updated three-year forward-looking view of projections and performance every year.