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Fonterra result

Fonterra result

Fonterra has lifted its forecast farmgate milk price for the 2015-16 season to $4.60/kg milksolids (MS). It also expects to pay a dividend of 40-50c a share.

Farmer shareholders have also been able to apply to receive a loan of an additional 50 cents a share-backed kilogram of milksolids for production through to December, through Fonterra Co-operative Support.

So far, more than 7000 applications have been received, about 70% of farmer shareholders.

Chairman John Wilson said the improved forecast farmgate milk price reflected the lift in global prices since July with whole milk powder increasing 44% and skim milk powder increasing 21% over the period.

“Current global prices are unsustainable. While there are signs that supply growth globally is easing, a lift in demand, which is needed for prices to continue to rise, is still to come,” Wilson said.

Fonterra has also lowered its forecast milk production for the season.

“We are 5% behind last season to date and are currently tracking 8% down on last season on a weekly basis. Farmers are responding to the tough economic conditions and with cow numbers down, less supplements being fed and challenging weather conditions for much of the country, we now expect production to be down by more than 5% for the season,” Wilson said.

Fonterra has announced a net profit after tax of $506 million for the financial year ended July 31, 2015 – up 183% – after a stronger second half performance in difficult market conditions.

The co-operative will pay a final cash payout of $4.65 for the 2015 season for a 100% share-backed farmer, made up of a Farmgate Milk Price of $4.40/kg milksolids (MS) and a dividend of 25 cents a share.

The forecast total payout available to farmers in the 2015-16 season is now $5-$5.10/kg MS, comprising:

• Forecast Farmgate Milk Price $4.60/kg MS

• Forecast earnings per share range of 40-50 cents a share.

Chairman John Wilson said extremely challenging trading conditions globally had affected all parts of the co-op’s business.
“Falling global dairy prices due to a supply and demand imbalance impacted the milk price, while the dividend reflected higher funding costs following significant investment in capacity to support milk growth in New Zealand, essential investments in the key strategic market of China, and the costs of maintaining a higher advance rate through the season.

“The strengthening of performance in the second half resulted in normalised earnings before interest and tax almost doubling, with good growth in our consumer and foodservice businesses and the results of a major push in our ingredients business to offset low milk prices with improved margins.”

Cash interest costs on funding were up $95 million to $427 million, which had an impact of about 6 cents a share.

Wilson said despite drought in some regions and floods late in the season, milk collection across NZ for the 2014-15 season to May 31, 2015 was 1614 million kg MS, up 2% on the previous season.