New Zealand dairy giant Fonterra has reported a strong performance in its underlying dairy business for the first half of its 2021 financial year.

Announcing half year results this week, Fonterra reported a 16% increase in underlying profits (EBIT) to just under €395m for the six months up to the end of January.

Fonterra’s half year results show underlying profit margins in the business increased to 6.6% after the group disposed of its DFE Pharma business last year.

Overall, Fonterra recorded a 5% decline in sales to just under €6bn in the first half of the year.

The dairy co-op said the main driver of the strong performance had been China, where demand is strong as the Chinese economy continues to recover from the impact of COVID-19.

Fonterra said profits from its business in greater China had increased almost 40% in the first half of the year to just over €200m.

The co-op said it reduced its debt slightly to just under €3.4bn in the period and announced a half year dividend to farmers of 5c per share.