Fonterra boosts profit as low milk prices hit farmers

New Zealand's Fonterra -- the world's largest dairy cooperative -- announced a 123 percent rise in interim profit on Wednesday but warned its farmers faced "unprecedented pressure" amid a slump in global milk prices.

Fonterra said net profit for the six months to January 31 was NZ$409 million (US$276 million), up from NZ$183 million in the previous year.

The amount of milk processed rose eight percent to 12.6 billion litres and earnings before interest and tax increased 77 percent to NZ$665 million.

Fonterra dominates the dairy business in New Zealand where the sector accounts for about one-fifth of total exports and is considered crucial to the national economy.

The result was widely expected as global milk prices remain depressed after scraping 12-year lows last year as Europe lifted production and demand from China fell.

The low prices mean Fonterra pays less for milk, its main raw material, but hits the bottom line of its 10,000-plus shareholder farmers, who receive less for the product they supply to the cooperative.

"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.