Fonterra Announces 20 Cent Lift In Payout

May 2007

Fonterra Announces 20 Cent Lift In Payout

Unprecedented prices during the past month in the global dairy market have led to Fonterra Co-operative Group increasing its forecast payout for the current season by 20 cents from $4.15 to $4.35.

Chairman Henry van der Heyden said there is strong demand in the market that Fonterra has been well placed to meet with good milk flows through the latter part of the season.

“As we secure contracts at new record prices we are able to pass on the gains to farmers. Prices are hitting record highs, but this 20 cent increase is still an excellent achievement given the coinciding record high exchange rates.”

Mr van der Heyden said that the good prices were expected to continue into the next season.

“Our early indications for 2007/08 were that the payout would be closer to $5 than $4. We’re now confident that if current exchange rates hold, next season’s payout will have a $5 in front of it.

“However the downside of the high commodity prices is that our value add businesses will face a tough year next season. In the current season the high prices have only impacted on a small proportion of the year. Next year they are likely to impact on the whole 12 months and this will mean our value add component of payout (essentially profit) will be down in 2007/08.

“We will announce the forecast for the 2007/08 payout on May 23 and will confirm the Fair Value Share price for that season,” Mr van der Heyden said.

The revised forecast for the 2006/07 season of $4.35 comprises the milk price component of $3.84 which has increased 14 cents and the value add component (essentially profit) of 51 cents which is up 6 cents.

The 6 cent increase in the value add component (essentially profit) is the result of ongoing cost efficiencies and higher sales in the value add businesses.

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