Fonterra shaves 50c off forecast milk price
Fonterra has dropped its forecast milk price mid-point by 50c as a surge in global milk production is putting downward pressure on commodity prices.
The co-op plans to make payments in April, May and August, with the two latter payments subject to final approvals at the time; the early payments are designed to ease cash flows on farm.
Fonterra usually pays dividends in April and October, and the change this year does not signal a long-term change to that normal practice.
Wilson says farmers have been in touch after the announcement expressing their gratitude.
"They are happy we are trying to put money back to our farmers," he told Dairy News.
Wilson says the forecast total dividend for the current financial year is 40c/share.
The board last week declared a 20c interim dividend to be paid in April.
"We intend declaring the remaining 20c/share in two dividends of 10 cents in May and 10 cents in August," Wilson says.
"The timing of these payments will help farmers' cashflows at the time of the season when they need it most; it is a specific response to the challenging financial conditions our farmers are facing."
May to August are typically the most difficult financially for farmers, with lower forecast milk payments in these months, he says.
"We looked carefully at the support options available to us and bringing forward payment of the total forecast dividend is the best way we can support our farmers while continuing to retain the financial strength of Fonterra."
The two dividends in May and August are still subject to the board's approval at the time. They are also subject to Fonterra's financial performance continuing to support its forecast earnings per share of not less than the current 45-55 cents forecast range per share.
The payments do not signal any intention to move away from Fonterra's normal practice of twice-yearly dividends paid in April and October. They are also consistent with Fonterra's dividend policy.
"We are firmly on track to achieve our forecast earnings of 45-55c/share, ahead of the 40-50c/share we indicated at the beginning of the season," says Wilson.
"We are backing ourselves to support our farmers and confirmation of the first payment will be made in May."
Wilson says they had considered an extension to the support loan provided early in the season which will total $383 million by April 2016.
But based on the solid performance of the cooperative in the first half it felt paying the final dividend earlier was the better option.
"This approach is directly related to the solid performance being achieved by the business."
Fonterra will also continue to competitively price stock in its Farm Source stores and pass on discounts secured on necessities such as fuel and power.
