Fonterra has reported a $659m net profit for the July year and said it would resume dividend payouts, starting with a final dividend of 5 cents per share.

The profit - reflecting its first full year under a revised strategy - compares with a $605m loss last year. The previous year's loss was driven by $826m in writedowns.

"We increased our profit after tax by more than $1 billion, reduced our debt by more than $1 billion and this has put us in a position to start paying dividends again," chief executive Miles Hurrell said in a statement.

Fonterra's normalised net profit after tax of $382m was up $118m on the previous year's - and in line with market expectations.

The co-op said it experienced a strong first half, but that parts of the business were hit hard by the impact of Covid-19 in the second half.

At 5 cents per share, the dividend was at the lower end of the 5-7 cent range calculated under the board's dividend policy guidelines and was well down from market expectations of around 9 to 10 cents a share.

Fonterra did not pay a dividend in 2019, or in the first half of its latest financial year.

The dairy co-op's normalised earnings before interest and tax came to 24 cents per share, the upper end of its 15 to 25c forecast range.

For the current year, it forecast a 20 to 35 cps earnings per share range.

The current season's milk price forecast was pitched in a $5.90 to $6.90 per kg band, unchanged from its previous forecast.

For the season just past, Fonterra settled on $7.14 per kg. With the dividend, the final cash payout comes to $7.19 per kg.

Under its new, customer-led operating model, Hurrell said the co-op had delivered a strong first half but that the pandemic had affected the second half, particularly in its Consumer and Foodservice businesses.

Fonterra had achieved its key financial targets with normalised earnings of 24 cents per share, a total group normalised gross profit of $3.2 billion, a $181m reduction in capital expenditure and a $1.1 billion reduction in debt.

The ratio of debt to EBITDA has now improved to be 3.4 times earnings, down from 4.4 times.

The stronger balance sheet had allowed Fonterra to focus on managing Covid-19.

"So far, demand for dairy has proved resilient and our diverse customer base and ability to change our product mix and move products between markets has meant we can continue to drive value," he said.

Hurrell said the main drivers of the underlying business performance was a strong normalised gross profit in the Ingredients business and, although there was the disruption from Covid-19, the strong sales and gross margins from the Greater China Foodservice business in the first half of the year.

Ingredients' normalised EBIT improved from $790m last year to $827m this year, with normalised gross profit up $165m to $1.6b.

"As we moved through the second half, we saw restaurants, cafes and bakeries close and intermittent spikes in supermarket sales, creating uncertainty across the global dairy market. This uncertainty resulted in softening milk prices, which helped improve the gross margin and gross profit in Ingredients."

Greater China Foodservice's normalised EBIT increased from $114m last year to $169m this year.

Hurrell said the business achieved strong year-on-year sales growth in the first half of the year but was then hit hard by Covid-19 when many food outlets were closed.

Normalised gross profit started to quickly rebound in the third quarter – although he said still not back to normal.

There was significant growth across the Anchor Food Professional product range in China.

As earlier advised in its third quarter guidance, Fonterra's Foodservice businesses across Asia, Oceania and Latin America were impacted by Covid-19 in the fourth quarter, with all three markets reporting losses in the second half.

Despite this, normalised EBIT for Foodservice overall was up 14 per cent on last year to $209m.

The Consumer business' normalised EBIT reduced to $149m from $227m, mainly as a result of impairments of $57m relating to the Chesdale brand and New Zealand Consumer business' goodwill.

Hurrell said the Australian Consumer business performed strongly with sales continuing to increase thanks to its popular beverage, spreads and cheese products.

Despite the better performance this year, due to the economic outlook post-Covid-19, Fonterra's New Zealand Consumer business's future cashflow projections were lower than estimated, prompting a goodwill writedown of $21m to $699m.

"This year marks a return to paying dividends, a position we expect to maintain in the future, assuming normal operating conditions," chairman John Monaghan said.

"In the context of so much uncertainty, as Covid-19 continues to impact our key markets and customer confidence, distributing a 5-cent dividend is a prudent decision and one that balances our aims of further reducing debt and distributing earnings," Monaghan said.

Looking ahead, Monaghan says the impact of COVID-19 was still playing out globally.

"From a milk price perspective, the supply and demand picture remains finely balanced and for that reason we are maintaining our previous forecast range for this season," he said.

"There continues to be significant uncertainties – including how the global recession and new waves of Covid-19 will impact demand globally, and what will happen to the price relativities between the products that determine our milk price and the rest of our product range."

Fonterra's NZX-listed units last traded at $4.05, having rallied by 26.6 per cent over the last 12 months