Fonterra lifts 2015/16 milk payout forecast to $4.60/kgMS   24 Sep 2015

Article - BusinessDesk

Fonterra lifts 2015/16 milk payout forecast to $4.60/kgMS after full-year profit surges

Sept. 24 (BusinessDesk) - Fonterra Cooperative Group, the world's biggest dairy exporter, raised its forecast milk payout from a decade low after posting a jump in full-year profit driven by improved returns from its consumer and food service businesses, and improved margins from ingredients.

The Auckland-based cooperative raised its forecast farmgate milk price to $4.60 per kilogram of milk solids from a decade-low $3.85/kgMS. That would bring the total payout to farmers for the 2015/16 season to between $5 and $5.10/kgMS, including forecast earnings per share of 40 cents to 50 cents. Fonterra reduced its forecast for New Zealand production volumes for the current season "by at least 5 percent," it said.

Net profit soared 183 percent to $506 million in the 12 months ended July 31, while normalised earnings before interest and tax climbed 94 percent to $974 million, the company said in a statement. While total sales volumes rose 9 percent to 4.3 million tonnes, revenue dropped 15 percent to $18.8 billion.

The cash payout fell 45 percent to $4.65, including a farmgate milk price of $4.40/kgMS and a dividend of 25 cents a share.

Chairman John Wilson said profit growth was driven by a better second-half performance.

“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,” Wilson said.

In the 2015 year, "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," he said.

Wilson said the lift in profitability in the second half of the 2015 financial year was expected to carry through into the current financial year. However, chief executive Theo Spierings said this year was "one of the most difficult I've known."

“Looking ahead, this uncertainty means that world markets are likely to be difficult in the medium term," Spierings said. "However, we will be more than ready when the market turns."

(BusinessDesk)

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