Fonterra lifts 2014 forecast milk price payout to $7.50 on limited supply, weaker kiwi
By Paul McBeth
July 31 (BusinessDesk) - Fonterra Cooperative Group, the world’s biggest dairy exporter, has lifted its forecast milk
payout to farmers by 50 cents in the 2014 season as global supply remains constrained and as a weaker local currency
bolsters export returns.
The Auckland-based company expects to pay $7.50 per kilogram of milksolids and an estimated dividend of 32 cents per
share, it said in a statement. That was ahead of the $7.40 per kgms predicted by Westpac economists last week. Fonterra
will pay $5.80 per kgms in the 2013 year, which ends today, and anticipates a dividend of 32 cents per share.
“Supply constraints in Europe and China during the Northern Hemisphere spring have contributed to an increase in dairy
prices of 3 percent over the past two months,” chairman John Wilson said. “In addition, the NZ dollar has weakened
against the US dollar. These factors have contributed to our updated forecast.”
The upgrade comes after Fonterra last week warned 2013 annual earnings will likely be 7.3 percent below forecast due to
the local drought at the start of the year and aggressive competition in Australia.
Chief executive Theo Spierings said rising commodity prices mean Fonterra will face higher costs in the first half of
the 2014 financial year and its margins could come under pressure.
“Taking into account the headwinds we face and current market volatility, the FY14 estimated dividend of 32 cents per
share may be outside the 65 to 75 percent range” of adjusted net profit, he said, referring to Fonterra’s dividend
policy.
Fonterra’s board has amended its dividend policy from the 2014 financial year onwards, taking into account short and
medium term earnings, along with market conditions and the company’s financial position. It will also adopt
“qualitative” earnings guidance, meaning it won’t put numbers around future earnings per share.
“This new policy will enable the business to provide a longer term view on any potential volatility in earnings,” Wilson
said.
Units in the Fonterra Shareholders’ Fund rose 0.8 percent to $7.49 yesterday, and have gained 6.5 percent this year.
(BusinessDesk)