Fonterra's annual results are unlikely to have any major surprises given that it put out a profit warning just before the end of its financial year in July.
The company warned its operating profit will be about $1 billion, that's lower than the forecast of almost $1.1 billion in its prospectus last year, before the Fonterra Shareholder Fund went to market.
That's off the back of unprecedented volatility caused by the drought.
Fonterra also says its Australian business is under pressure, and the reshaping of the business across the Tasman will result in a number of write-offs.
Craigs Investment Partners senior equity analyst Arie Dekker says the co-operative had a strong first half, with operating profit around $700 million, so the warning implies a very significant turn-around in the second half.
He says the high commodity prices flow through to the farm-gate milk price, but for Fonterra that milk price is a cost good across the group which puts pressure on their margins.
But Mr Dekker says Fonterra does have a clear strategy to take cost out of the business, improve efficiency across production and the supply chain and to increase their exposure to value added products.
He says those factors provide an opportunity to lift the underlying performance of the business.
"So the market expects volatility in Fonterra's business, but the area of greater interest in the result is really going to be the progress made around improving the underlying performance through those various initiatives."
