Kia ora, and thanks for joining us. Welcome to our 2023 annual results briefing. I'm Miles Hurrell, CEO of Fonterra, and I'm here with Neil Beaumont, our Chief Financial Officer. We're gonna kick things off with an overview of our performance before asking Neil to take us through the numbers, and then it'll be over to you to ask your questions. Before we get into it, I wanna start by acknowledging and thanking our farmers and our people right across the cooperative. We know it's tough on farm right now, but it's great to be reporting such a strong set of results today. Looking at the core metrics, profit after tax is up NZD 994 million to 1.6 billion, due to favorable margins in our Ingredients channel and the gain on sale of Soprole.
The significant lift in earnings has meant the co-op's Return on Capital has increased this year to 12.4%, up from 6.8% last year, and earnings per share increased from NZD 0.36 to 0.95 per share. However, this has been against the backdrop of a Farmgate Milk Price that has dropped across the season, down from NZD 9.30 the prior year to NZD 8.22 per kilogram of milk solids in 2023. As I mentioned earlier, we know that our farmers are doing it tough, but a strong balance sheet has assisted us to pay a full year dividend of 50 cents, which is slightly above our dividend policy range of 40% to 60%.
The NZD 0.50 per share dividend comprises NZD 0.10 we paid after the half year results, and the final dividend of NZD 0.40 per share, which is to be paid in mid-October. As part of our strategy to focus on New Zealand milk, we completed the sale of Soprole on March 31st this year, and in August, we used NZD 804 million of the sale proceeds to give to unitholders and shareholders a NZD 0.50 per share tax-free capital return. This meant fully backed shareholders received NZD 9.22 for the milk they supplied the cooperative. You'll also see we've introduced two new metrics. These are: Gross Profit from Core Operations per kg of milk solids and Cash Operating Expenses per kg of milk solids. Neil will touch on these in more detail shortly.
Looking at the global dairy industry, on the milk supply side, we've seen growth in the E.U. and U.S., largely due to growing herd sizes. However, production is down in Australia and New Zealand, both impacted by challenging weather conditions. On the demand side, imports were down in China, Asia, and the Middle East and Africa, partially offset by a little bit of growth in Latin America. Reduced demand from these key importing regions impacted pricing of our reference products, particularly that of whole milk powder. As mentioned earlier, this has had a flow-on effect to the Farmgate Milk Price. This graph illustrates how the price relativities compare to previous years. These higher margins, mainly in the Ingredients channel, are the key contributor to the earnings we're reporting today.
The reduction in the Farmgate Milk Price this season was primarily driven by lower product prices, again, particularly Whole Milk Powder. Around 60% of the Farmgate Milk Price revenue was derived from Whole Milk Powder sales, and the average Whole Milk Powder price for the 2023 season was 16% lower than the prior. In response to this, we allocated more milk to Skim Milk Powder and its byproducts, particularly butter, and while skim and butter prices were also down on the prior year, it was to a lesser extent, in this case, 14% and 10% respectively. Like most businesses, we've experienced inflationary pressures right across the board, which is part of the additional NZD 0.13 you'll see in our costs. This includes things like manufacturing, transport, packaging, and energy.
This year, we had a lower FX conversion rate than the previous year, which partially offset the decrease in product prices. I'll now hand over to Neil to take us through the financial performance in a bit more detail.
Thanks, Miles. I'm pleased to present to you our key financial outcomes for the year, as well as our new Resource Allocation Framework and efficiency metrics. We have introduced a new Resource Allocation Framework to increase our focus on the efficient allocation of our farmers' milk and cash. Our first priority is safe and efficient operations. We then allocate our farmers' milk toward either our Ingredients, Foodservice, or Consumer channels, and the brands and offerings within those, according to where we believe we will see the highest risk-adjusted returns. Following this, we allocate the cash generated from these channels to one of the six buckets. Each bucket needs to compete with the others, and we allocate based on which will generate the best outcome for our shareholders.
The Resource Allocation Framework is embedded across Fonterra and seeks to deliver enhanced value in the form of a strong balance sheet, total shareholder returns, and farm profitability. The co-op is focused on shifting our New Zealand milk into higher value products. This is a key driver of our strategy to deliver both a strong Farmgate Milk Price and earnings growth. Looking at the graph on the left, you can see we continue to reduce allocation of milk solids to Whole Milk Powder and increased allocation to Skim Milk Powder, cream, and cheese, where returns are more favorable. Now, looking at the chart on the right, allocation to our Ingredients channel increased in FY 2023. This reflects the sell-down of the additional 2022 financial year inventory.
We also put more milk solids into our Foodservice channel as demand increased as a result of the COVID-19-related restrictions lifting, particularly in our Greater China region. Our reportable segments show we are diversified across both channels and markets. Before we look at the numbers, it is worth noting that we have updated our segments to be reported down to a profit after tax level and now fully allocate our corporate costs and interest and tax within the segments. Looking first at Core Operations, which represents the business activities that collect and process New Zealand milk through to selling the products to our customer-facing business units. Core operations is up NZD 532 million to 572 million, reflecting the favorable price relativities. Global markets' profit after tax was up NZD 77 million, reflecting improved pricing and higher sales volumes in the Ingredients channel.
This was partially offset by recognizing impairments of our New Zealand consumer business and Asia brands of NZD 121 million and 55 million impairment, respectively. Looking at Greater China, profit after tax was relatively stable at NZD 284 million , where we saw higher pricing in the Food service channel. This again, was partially offset by recognizing a NZD 46 million impairment of our Asian brands in the consumer channel. Our ingredients channel has solid results, given the price relativities already discussed. Our Food service channel's profit after tax increased due to improved gross margins, combined with higher sales volumes. The consumer channel continues to be challenging and is down on last year, mainly due to impairments of our domestic New Zealand consumer brands and our Asian brands.
This next slide is showing you the returns we generated across our three product channels relative to the capital they employ. As Miles and I have already said, the earnings performance for our Ingredients and Foodservice channels improved year-on-year, and so did their return on capital. This said, our Consumer channel return on capital remains unacceptable, with a return on capital of -4.6%, down from 40 basis points in FY 2022. The Consumer channel performance this year was impacted due to recognizing impairments of our New Zealand Consumer business and our Asian brands of NZD 121 million and NZD 101 million, respectively. It's a key focus of ours to improve the value we extract from the capital employed in the Consumer channel.
I am very pleased to report that we have a strong balance sheet, and this remains a key priority for us. This has been achieved progressively over recent years through a combination of improved performance and increased financial discipline. Our net debt is down NZD 2.1 billion to 3.2 billion, reflecting our lift in earnings, the reduction in working capital, and divestment proceeds. This number also includes provision at balance sheet date for the amount we paid out for in the capital return. The improvement in the gearing ratio reflects the lower level of debt, combined with higher equity from our increased earnings. By reducing our overall debt position, we have created optionality for our business to support farmers through increased dividends, the ability to pay the capital return, and changes to our advance rate schedule. Importantly, we continue to be committed to maintaining our credit rating.
Both S&P and Fitch have Fonterra as A-rated, which allows our businesses to access capital with more favorable terms should the need arise in the future. We are very focused on further strengthening our business by safely and sustainably driving down costs by approximately NZD 1 billion by 2030. As Miles mentioned earlier, we have introduced two new core metrics, which will keep us focused on driving efficiencies for the co-op year-on-year. These metrics will help us be efficient by ensuring that our costs are managed relative to the value we can generate and the milk volumes that we collect.
The two new core metrics are: Cash Operating Expenses per kg of milk solids, where we will target a 4% improvement per year to assist long-term discipline in our global operating expenses, and Gross Profit from Core Operations per kilogram of milk solids, which will help ensure we stay focused on delivering value from our New Zealand operations, which is targeting a 2% improvement every year. Moving forward, we will advise progress against these metrics at our interim and full-year updates. Miles will now comment on the outlook for FY 2024.
Thanks, Neil. 2023/2024 season Farmgate Milk Price is NZD 6.00 to 7.50 per kg of milk solids, with a midpoint of NZD 6.75. Demand for imported powders into China remains soft, but it is still early in the season. There are indications demand for New Zealand milk powder will start to return from early 2024. In the meantime, we'll continue to respond to market signals and adjust our forecast Farmgate Milk Price to ensure that the impact of current prices and currency movements is transparent. Looking out to FY 2024 earnings, our guidance range for continuing operations is NZD 0.45 to 0.60 per share. Earnings from discontinued operations will be affected by the timing of completion of the DPA Brazil sale. We anticipate that the favorable price relativities that we experienced in FY 2023 will reduce over FY 2024 and impact our Ingredients channel earnings.
Our Foodservice and Consumer business gross margins are expected to improve over the year as the lower cost of milk flows through. The co-op is in good shape, and we look forward to the year ahead. Thank you for your time.