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Fonterra: Forecast To $4.07

11 April 2006

Efficiency Drive And Currency Lift Payout Forecast To $4.07

Fonterra Co-operative Group has increased its forecast payout for the 2005/06 season to $4.07 per kilogram of milksolids.

Announcing the increase today, Chairman Henry van der Heyden said the drive to reduce costs in the co-operative, coupled with the recent fall in the New Zealand dollar were contributing factors.

"The dollar's decline has come later in the season than we would have liked, but the current prevailing exchange rate will give some small relief in our average exchange rate for the full year. That's a benefit from the options in our foreign exchange hedging. However, the final payout for the year could still be influenced either way by further significant movements in the NZ vs US exchange rate.

"This is a good forecast given the slight easing in commodity prices, the high exchange rate that prevailed this year and the fact that our production for the year will be almost two percent below budget as a result of the mixed bag of climatic conditions across the country."

Mr van der Heyden said: "cost reductions in the co-operative were a valuable and timely contributor to the payout forecast and farmers could be assured that the drive to bring costs down would continue. I know this will be welcomed by farmers who are facing higher on-farm costs and tight budgets."

Mr Van der Heyden also reminded farmers who are currently doing their own budget planning that the changes to the Capital Structure agreed to last year included a one-off transitional assistance payment of 10c per kgms as outlined in the Capital Structure Proposal booklet.

ENDS

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