Hello, and welcome. I'm Miles Hurrell, Chief Executive of Fonterra. First, I'd like to introduce Neil Beaumont, our new Chief Financial Officer. Neil joined us at the start of February and has got straight into understanding our cooperative and how we can accelerate implementation of our 2030 strategy . Welcome, Neil. Today, we're gonna take you through the performance update for the first six months of FY 2023. First, I wanna acknowledge it's been tough for many of our people right across the business impacted by severe weather events, including our farmers. As you'll see from the summary slide, we've had a strong first half with a lift in earnings, which has flowed through to an improvement on our Return on Capital. The cooperative is performing well against the backdrop of ongoing market volatility.
Our scale and diversification of channels and markets is enabling us to navigate through disruption and make the most of favorable market conditions. Milk Powder prices have softened recently, impacting our forecast farm-gate milk price. We have a forecast range for the season of NZD 8.20-NZD 8.80 per kilogram of milk solids, down from the NZD 8.50-NZD 9.50 we had previously. In contrast, protein and cheese prices have been strong, and this is reflected in a lift in earnings, which we're reporting today. Our profit after tax is up 50% from NZD 364 million to NZD 546 million. Our Earnings per share for the six months is NZD 0.33, up from NZD 0.22 for the prior period.
These earnings are the key driver in our improved Return on Capital for the last 12 months, which is 8.6%, up from 6.1%. This earnings performance and the strength of our balance sheet have enabled us to pay an interim dividend of NZD 0.10, which is positive news for our farmer owners and unitholders. In addition, today, we've upgraded our forecast full-year Earnings per share from NZD 0.50-NZD 0.70 to NZD 0.55-NZD 0.75 per share, reflecting the continued strong prices for protein and cheese products. We've also continued to make progress on our strategy, which we'll talk about in more detail shortly. Over the next couple of slides, we're going to provide some context on the global dairy industry. Milk supply from the key producing regions is slightly down year-on-year.
In recent months, we have seen growth in both the U.S. and Europe due to increased herd sizes. Here in New Zealand, Fonterra collections are down 1.6% as of 31 January. Wet conditions across the North Island, especially early in the season, combined with a reduction in cow numbers, have resulted in a lower peak than last season. On the demand side, China imports are down. Imports into Latin America, Middle East, and Africa are up. We expect demand to remain positive in the medium to long term and do not see milk supply growing significantly over the medium to long term. This next slide illustrates how prices have moved over the last few years. Globally, pricing of milk powder, Whole Milk Powder in particular, has softened compared to last year, due mainly to lower demand from China that I already mentioned.
Meanwhile, protein prices are higher than last year, particularly for Casein and Caseinate, driven by constrained manufacturing capacity and ongoing strong demand. The slide here shows how pricing dynamic between powders and proteins had contributed to our earnings over the first half. The graph shows the price relativity between Reference Products which inform our farm-gate milk price and Non-Reference Products which drive our earnings. You can see the price relativity in the first half of FY 2023, which is much wider than the first half of FY 2022, as well as relative to historic levels. In the chart, we use GDT Cheddar as a proxy for Non-Reference Products, and I would note that other Non-Reference Products, such as Casein and Caseinate products, are even more favorable than what is illustrated here by Cheddar cheese.
These favorable price relativities have driven our higher margins, particularly in the ingredients channel, and are the key contributor to the earnings we've reported today. We've changed our product mix in response to market conditions. With less milk collected and Whole Milk Powder prices down, we've produced less Whole Milk Powder and moved product into skim and cream products that have a higher return. We've also made the most of the favorable margins in our protein portfolio, notably Casein, Caseinate, and cheese products, by moving the high proportion of current milk season into these products, which has benefited our earnings. Efficient operations are vital to getting our product to customers in our offshore markets. The severe weather events at the start of the year put pressure on an already strained national supply chain network, with roads, rail, and ports all impacted.
This delayed some of our products in getting onto ships, but we're working with our supply chain partners to reduce inventory and get product to our customers. We continue to make our operations more efficient. An example of this is the automation of our Crawford Street coastal distribution center, which is now complete. The automation will improve site efficiency, reduce energy consumption, and enhance the integrity of our products. We continue to make progress on our decarbonization program. We're currently converting a coal boiler at our Waitara site to a wood biomass boiler. This project is expected to be completed in FY 2024. Moving on to our long-term strategy. We are making good progress on a commitment to prioritize New Zealand milk with the sale of our businesses in Chile and Brazil already agreed.
In February, we received approval from the Chilean Competition Authority, a key milestone in the sale of this business. A new flexible shareholding capital structure supports a sustainable milk supply and a stable balance sheet while protecting farmer ownership and control. The transition to our new capital structure will occur on 20th of March this year. We continue to make sustainability improvement both on-farm and off-farm to ensure we retain our competitive edge. At last year's annual meeting, we signaled to farmers the co-op was looking to set a target for on-farm Scope 3 emissions. Having a target will help us secure and retain high-value customers and enable the co-op and our farmer owners to meet regulatory requirements and access to capital. We're pleased to be providing an update on the proposed capital return to our farmer owners and unitholders.
We previously stated the intention to return around NZD 1 billion to shareholders and unitholders by FY 2024, subject to the outcome of the reviews of our ownership of Fonterra Australia and our Chilean Soprole business. We subsequently made the decision to retain full ownership of Fonterra Australia, which is performing well, and you'll see in these results. Following completion of the sale of Soprole, we intend to reduce debt and return around NZD 0.50 a share and unit, which is approximately NZD 800 million. We're aiming for a record date of the proposed tax-free capital return late in September 2023, with cash to be received by farmer owners and unitholders the following month. Implementation of the capital return will require a scheme of arrangement to be voted on by shareholders and approval by the High Court, a common practice for this type of transaction.
More information on the process will be provided to farmer owners and unitholders in due course. I'll now hand over to Neil to talk us through the numbers in more detail.
Thanks, Miles. It's a real pleasure to be part of the Fonterra team, and I look forward to the opportunity to meeting many more of you in the future. Taking a look at some of our more key numbers. Our sales numbers for the first six months were higher due to the sell down of the additional inventory we held at year-end. Gross margin and gross profit are up, mainly due to the favorable price relativities that Miles discussed, and these are reflected in the performance of our ingredients channel. Our operating expenses are also up, and there are three main reasons for this. There is the impact of impairments. This includes a NZD 92 million impairment of our New Zealand consumer business and a NZD 70 million impairment of our Asia brands, which I will discuss in a bit more detail in a moment.
Second, inflation has impacted our business. Finally, the impact of foreign exchange. In terms of the impairments, our domestic consumer business, Fonterra Brands New Zealand, has been under margin pressure for some time, and it is not improving as fast as we had planned. In the case of the performance of our Asia brands, these have been impacted by weakening currency, higher interest rates, and a declining economic environment in some Southeast Asian markets. All in, our Normalised profit after tax is up 68% to NZD 611 million. This next slide shows our reportable segments and performance across channels and markets. It is worth noting that we've updated our segments to reflect an organizational change, where Group Operations is shown as a separate segment and the previous results of AMENA and Asia-Pacific segments are now combined into the new Global Markets segment.
Group Operations represents the business activities that collect and process New Zealand milk through selling the products to our customer-facing regional business units, Global Markets and Greater China. Group Operations is up NZD 412 million to NZD 501 million, reflecting the favorable price relativities. The performance of the two regions reflect the end market value added after purchasing the products from Group Operations at a market-based transfer price. Looking first at Global Markets. Normalised EBIT was relatively constant at NZD 267 million. Looking at Greater China, Normalised EBIT was also relatively constant at NZD 250 million, where we saw the food service channel performing well despite the market disruption from COVID-19. This was offset by the consumer channel, which included a proportion of the impairment of some of our Asia brands.
Our ingredients channel had strong results given the price relativities already discussed. Our food service channel's EBIT increased with the end market product pricing adjusting for the higher cost of milk. The consumer channel continues to be challenging due to both higher input costs and ongoing pressure on margins. I'm very pleased to report that we have a strong balance sheet, and this is a key priority for us. This has been achieved progressively over recent years through a combination of improved performance and increased financial discipline. Importantly, we continue to be committed to our strong credit rating. The higher working capital we had at the end of last financial year has been sold as planned, and this has flowed through to strong cash flow which we've experienced over the last six months. Free cash flow is an important metric for us.
It's the cash flow available to pay dividends, reduce debt, and invest in growth capital and innovation. For the first six months of our financial year, our Free cash flow is typically an outflow reflecting the seasonal nature of the business. This year, however, our Free cash flow is only an outflow of NZD 30 million. This is illustrated by the bridge on the slide, where the key drivers to our approved Free cash flow position are higher earnings, our favorable working capital movements. These were mainly due to the shipment of additional inventory held at year-end. I'll now hand back to Miles to discuss the outlook for the remainder of the year.
Thanks, Neil. We revised the forecast Farm-gate milk price range down to NZD 8.20-NZD 8.80 per kilogram of milk solids in February, reflecting reduced demand for Whole Milk Powder, particularly from Greater China at a time of balanced global milk supply. Demand for New Zealand's high-quality, sustainable dairy nutrition remains positive and global milk supply is likely to be constrained in the medium to long term. We'll be out in May this year with a forecast opening price for the FY 2023-FY 2024 season. Turning to the FY 2023 earnings outlook. Strong margins in our ingredients channel have sustained longer than initially assumed, which is why we've upgraded our forecast normalized full-year earnings from NZD 0.50-NZD 0.70 per share to NZD 0.55-NZD 0.75 per share with a midpoint of NZD 0.65 a share.
Our contracted rate is in line with expectation. We'll continue to watch market volatility across the rest of the year. This is reflected in the NZD 0.20 range. In summary, I'm really proud of how teams across the business have worked hard to deliver for our farmer owners, unitholders, and customers. There's a Q&A conference call at 2:30 P.M. New Zealand time today that you're welcome to dial into. The dial-in details are on the market release to the NZX website. That's all from us. Thank you for joining us today.