Drought taxes New Zealand dairy giant Fonterra

WELLINGTON, New Zealand (AP) — A drought shrank revenue at New Zealand dairy giant Fonterra, but the company says Chinese demand for milk powder remains robust.

Fonterra is New Zealand's largest company and a bellwether for the fortunes of the South Pacific nation's farming-driven economy.

The company announced Wednesday that in the year ending July 31, revenue was down 6 percent at 18.6 billion New Zealand dollars ($15.3 billion) after a drought dried fields and lowered milk volumes. Profit after tax was up 18 percent at NZ$736 million.

Fonterra's reputation was dented last month when it triggered a global recall of infant formula due to fears that it was contaminated with botulism bacteria. Further testing showed it was a false alarm. Any financial fallout from the scare will be reflected in next year's results.

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