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Fonterra Fair Value Share Price Up 7%

For immediate release

26 May 2004

Fonterra Fair Value Share Price Up 7%

Fonterra Co-operative Group's Fair Value Share price for the 2004/05 season has been set at $4.69, an increase of seven per cent on the 2003/04 season's $4.38, and 19 cents higher than the $4.50 estimate for 2004/05 provided last December.

The increase signals a continuation of the positive trend in the Fair Value Share price, said Fonterra Chairman Henry van der Heyden, and provides independent confirmation that the co-operative is making steady progress and creating greater wealth for shareholders.

"While payout is a snapshot of performance for one season, Fair Value Share price takes into account the long-term prospects of the co-operative and long-term benefits for shareholders."

Fonterra's Board of Directors set the estimated value from a range calculated by independent valuers Standard & Poor's Corporate Value Consulting (CVC) in accordance with Fonterra's constitution.

Standard & Poor's CVC valued each share at between $4.34 and $5.05 (compared with a range of $4.05 to $4.71 for the 2003/04 price).

Mr van der Heyden said the positive trends in the business identified by the valuer when it provided its estimated share price six months earlier had since strengthened.

He said the largest factor behind the increase was a decline in debt. A reduction in working capital, and in particular a reduction in inventories, was a significant contributor to this. In addition, the valuer had also acknowledged Fonterra's strong performance by assessing an increase in Fonterra's underlying enterprise value.

"Our balance sheet is a lot stronger. Because farmers own more of the business than before and the banks less, the value of each share has risen. Our improved performance also adds to the enterprise value."

Given the increased strength in commodity markets and the lower Kiwi dollar, Mr van der Heyden said Fonterra would revisit its payout forecast for both this season (2003/04) and next season (2004/05). The Board would meet within the next month to consider both forecasts, currently $4.15 per kg/ms for 2003/04 and $3.50 per kg/ms for 2004/05.

ENDS

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