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Fonterra chairman John Wilson.
Fonterra has delivered some good news for its farmers this morning – it's lifting the forecast earnings per share by 5c/kgMS and boosting its financial aid to farmers.
Fonterra says it's increasing its forecast earnings per share range for the current financial year to 45-55 cents; in September it announced a range of 40-50c.
With a forecast farmgate milk price of $4.60 this lifts the total available for payout to $5.05-5.15/ kgMS and would currently equate to a total forecast cash payout of $4.95-5.00 per kgMS after retentions.
Fonterra is also increasing the rate at which farmers are paid the Cooperative Support of 50c/kgMS, with the total amount paid up to December going from 18 cents to 25 cents. Fonterra Cooperative Support – equalling 50c/kgMS on share-backed production from June to December through a loan that is interest-free until 31 May 2017 – is supporting farmers in a low milk price environment.
Chairman John Wilson said performance in the period 1 August – 31 October 2015 built on the strong second half of the 2015 financial year.
"While it is tough on farm due to low global milk prices, farmers will welcome the ongoing improvement in Fonterra's performance delivering increased returns.
"Performance is well ahead of last year and we are hitting our targets on gross margins and operating and capital expenses.
"At the same time, the acceleration of business transformation initiatives is generating significant cash savings. We are on track, and therefore able to lift our forecast earnings per share range."
At this stage of the season based on the dividend policy, management would recommend at the end of the financial year an annual dividend of 35-40 cents per share, which would then be subject to Board approval. This would equate to a total forecast cash payout of $4.95 -5.00/kgMS.
"The performance and business transformation savings mean we are also able to increase the December Cooperative Support payment and payments will now be completed by April which means that farmers have access to more of that support earlier," says Wilson.
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
Kiwis love their butter, and that's great because New Zealand produces some of the best butter in the world. But when the price of butter goes up, it's tough for some, particularly when many other grocery staples have also gone up and the heat goes on co-operative Fonterra, the country's main butter maker. Here the co-op explains why butter prices are so high right now.
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