What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
Fonterra chairman John Monaghan says the board has decided not to declare an interim dividend as uncertainty swirls over Covid-19.
“After considering the current uncertainty of the impact Covid-19 could have on earnings in the second half of the year, the board has elected to not pay an interim dividend.
“At the end of the financial year the Board will reassess the co-op’s financial position and review the decision to pay a dividend.”
Investors in Fonterra units received no dividends in 2019 and only 10c/share in 2018.
While no interim dividend was declared, the co-op’s reaffirming the forecast farmgate milk price range of $7-$7.60/kgMS and forecast normalised earnings guidance of 15-25 cents per share.
Hurrell says the co-op’s underlying earnings are tracking well at the half year.
“But there is no doubt that we have a number of risks that are outside our control in the second half – in particular, the potential impact of COVID-19 on global demand, geo-political risks in key markets such as Hong Kong and Chile, and ongoing dry weather conditions here in New Zealand which could impact collections and potentially input costs. As a result, we have held our forecast earnings range at 15-25 cents per share.
“As I said a few weeks ago, we have already contracted a high percentage of this year’s milk supply. But our teams know we have to keep our foot on the pedal and navigate very carefully through the challenges we’ll face in the second half.”
