One of Australia's major dairy processors has delivered a 25 per cent jump in profit for the past six months, despite a steadily shrinking milk supply and ballooning expenses.

Fonterra Co-Operative Group on Thursday released its 2023 interim results, which showed its Australian branch earned NZ$74 million ($68.8 million) before interest and tax in the past six months.

Among the company's portfolio of brands are Western Star butter, Mainland cheese, Perfect Italiano, and the Bega Cheese brand under a decades-long licence arrangement.

Managing director Rene Dedoncker said the profits came amid hyper inflation, supply chain disruptions and labour shortages.

"With that as the backdrop, these sorts of results demonstrate the strength in our business," he said.

"It does talk to the diversity in our business. 

"We have big brands on supermarket shelves that are in mum and dad's fridges ... equally we've got an out-of-home presence, so chefs, pubs, clubs, cafes, but we also selectively sell ingredients to other food manufacturers domestically."

The interim report noted the performance was driven by strong global prices for cheese and protein products, "offsetting the rising cost of milk".

However, it also said the market price it was getting for its products had not kept pace with the cost of buying raw milk from farmers, which had negatively impacted its margins.

The company also posted a 23 per cent increase in expenses in the past six months, blowing out from NZ$79 million to NZ$97 million.

"Our expense line ... is something that has my full attention," Mr Dedoncker said.

"Diesel, electricity, gas, even the cardboard that we use in the wrap on our cheese products — everything has a double-digit figure in front of it.

He ruled out further consolidation and rationalisation of Fonterra Australia's operations, despite earlier this year saying he believed more consolidation would come in the Australian dairy industry.

The results also revealed milk collection was down by 2 per cent in the past six months, bringing in 66 million kilograms of milk solids.

It follows news Australia's annual milk production is due to drop to about eight billions litres, the lowest level in about 30 years.

Mr Dedoncker argued his company's figure was holding up "reasonably well" compared to the rest of the market, blaming poor weather last year.

When asked for a ballpark figure on what Fonterra Australia would be willing to pay farmers in the upcoming season, the managing director remained tight-lipped but did not rule out the possibility of longer contracts, such as those recently offered by Coles.

The ABC understands those contracts locked in a price of more than $10 a kilogram of milk solids for the next three years.