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Fair Value Share Price for 06/07 Announced

Media Release
26 May 2006

Fonterra Announces Fair Value Share Price for 2006/07

Fonterra Co-operative Group has announced a Fair Value Share price for the 2006/07 season of $5.80i, an increase of six per cent on the current season’s share price of $5.44. It has also forecast a payout of $4.05 for next season.

The 2006/07 Fair Value Share Price is the mid-point in the valuation range of $5.37 to $6.24 provided to the Board by the independent valuer, Duff & Phelps.

Fonterra Chairman Henry van der Heyden said increased valuations of both the Fonterra Ingredients and Fonterra Brands businesses had contributed to the higher valuation range, reflecting good progress in both of these businesses.

“The increase in the valuation takes into account some of the business improvements being delivered in our on-going drive for efficiencies across the whole business and anticipates further contributions from business improvements in the medium term. In addition the value of Fonterra Brands has benefited from synergies created by recent acquisitions. This is a good result for shareholders and continues the trend of appreciating share values in the co-operative.”

Mr van der Heyden said the 2006/07 season forecast payout of $4.05 per kg/MS reflected Fonterra’s view that overall trading conditions for dairy products were reasonably stable.

“Commodity prices have come off the record highs we’ve experienced in the last couple of seasons and there is some possibility of further softening, but there is still good demand and the underlying global inventory position is balanced.

“A softer commodity price forecast is offset by a lower foreign exchange rate and significant growth in the returns from the group’s value-add activities. The forecast payout is a good projection, not only for farmers, but for New Zealand as a whole, given the contribution dairy makes to the overall economy.”

Fonterra’s Fair Value Share price for the coming season at $5.80 compares to the interim valuation of $5.86 made in December. The May valuation sets the FVS price for the season and it is the one shareholders use to determine the increase in Fonterra share values from season to season. This final valuation takes into account information such as actual budget forecast for the season ahead and approved three-year business plans.

i Note this price will change once the transition to the new capital structure has been completed to reflect the transfer of capital previously held as peak notes into ordinary share capital. Based on current information, the estimated post-transition share price is $6.62.


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