UPDATED 2.13PM A remarkable result for Fonterra, in light of the dairy downturn.

The dairy giant has posted a 65 per cent jump in annual net profit to $834 million despite a challenging global market.

Chairman John Wilson said the last season had been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

But he said Fonterra's business strategy was serving it well.

"We are moving more milk into higher-returning consumer and foodservice products."

Last year its net profit was $506m.

The co-operative on Wednesday lifted its forecast payout for farmers for this season to $5.25 per kilogram of milk solids - its second hike with a month.

Mr Wilson said milk prices remained low but there were indications things were on the rise.

"As the signs in the market improve, we are very strongly positioned to build on a good result in the year to come."

Fonterra CEO Theo Spiering said Fonterra is starting to dominate the Chinese market.

"Our share, you see that $5 billion sold in China, and that is by far the number one when you talk about the world of dairy. Not only in business but also in reputation."

Spiering said any doubts over the company's direction should now be put to rest.

"We in the business have adapted and we drove this transformation which really brought back good results, but also proves the strategy is working."

Chief executive Theo Spierings says the strategy of selling more volumes of milk solid at a higher value is paying off.

"For our farmers, the promise is that we will make the most of their milk. We're keeping that promise."

It had an annual revenue of $17.2 billion which was down 9 per cent on last year, while debt was reduced by $1.6b to $5.5b.

Additional reporting by NZ Newswire