Drought takes its toll on Fonterra’s forecast

25 July 2013

Drought takes its toll on Fonterra’s forecast

Federated Farmers is not surprised Fonterra Cooperative Group has announced a decrease in its 2013 forecast earnings before interest and taxation. This is due to the impact of the drought and pressures in its Australian operations.

“I think farmers will be relieved Fonterra has reconfirmed the forecast cash payout will remain unchanged for the 2012/13 season at $6.12. However, the reality of this announcement is that everything has a flow on effect,” says Andrew Hoggard, Federated Farmers Dairy vice-chairperson.

“All those people who have looked at the increased prices on the Global Dairy Trade (GDT) platform and then decided to buy more Fonterra units on the stock exchange may not have understood how it all works. Increases in GDT prices actually mean tighter margins as the base commodities that Fonterra uses to make its own products also rise in price.

“You can see by this announcement it wasn’t a benefit to investors as the higher GDT actually means less profit.

“Farmers should not be too complacent about this announcement as Fonterra’s Forecast for 2014 is scheduled for next week.

“The drought may be over but it still has a sting in its tail.” Mr Hoggard concluded.

ends

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