Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Fonterra cuts forecast milk payout to $6.40/kgMS

Fonterra cuts forecast milk payout to $6.40/kgMS on falling dairy prices

By Jonathan Underhill

Dec. 7 (BusinessDesk) - Fonterra Cooperative Group cut its forecast farmgate milk price citing weaker global dairy prices and increased production and skim milk stockpiles in Europe.

The dairy company cut the payout forecast to $6.40 per kilogram of milk solids, within the range expected by economists, from the $6.75/kgMS forecast in September.

The GlobalDairyTrade price index rose 0.4 percent in this week's auction, snapping four consecutive declines, although the gain came on lower volumes sold. Fonterra paid its farmer suppliers $6.15/kgMS for the 2016/17 season and $3.90/kgMS for the 2015/16 season.

Chairman John Wilson said the cut reflects ongoing volatility in global dairy prices and cited a 10 percent drop in the price of whole milk powder since Aug. 1.

"What is driving this forecast is that despite demand for dairy remaining strong, particularly in China, other parts of Asia and Latin America, we are seeing strong production out of Europe and continued high levels of EU intervention stockpiles of skim milk powder," he said in a statement to the ASX. The impact on Fonterra was being partly offset by a weaker New Zealand dollar, he said.

Fonterra also cut its forecast New Zealand milk collection for this season, by 1 percent to 1,525 million kilograms of milk solids from the 1,540 million kilograms it projected in October, which itself was a downgrade.The cut reflected "ongoing challenging weather conditions."

Revenue in the first quarter rose 4 percent to $4 billion although sales volumes dropped 20 percent to 3.9 billion liquid milk equivalent and said its gross margin fell to 16.7 percent.

Chief executive Theo Spierings said Fonterra started the year with record low inventory after the second straight year of low spring milk collections from New Zealand "due to wet weather."

"This has challenged our ingredients business where we had lower volumes to sell," he said. "As a result, sales were down 19 percent to 3.6 billion LMEs." The gross margin from ingredients fell to 8.1 percent from 12.1 percent.

Consumer and food service recorded "strong sales volumes in our key markets across both Greater China and Asia with, overall, just a 3 percent decline to 1.3 million LMEs in total volume compared to the record levels at the same time last year," Spierings said.

The gross margin in consumer and food service fell to 24 percent in the first quarter from 31 percent a year earlier. Spierings said Fonterra is confident of meeting its full-year forecasts following revisions after the recent Danone announcement.

Last week Fonterra cut its forecast for 2018 earnings per share to a range of 35 to 45 cents, from 45 to 55 cents after an arbitration tribunal in Singapore ruled it must pay 105 million euros to Danone in the wake of 2013's whey protein recall.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Real Estate: Foreign Buyers Ban Passes Third Reading

The Bill to put in place the Government’s policy of banning overseas buyers of existing homes has passed its third and final reading in the House. More>>

ALSO:

Nine Merger: Fairfax Slashes Value Of NZ Business

Fairfax Media Group more than halved the value of its Kiwi assets, attaching just A$40 million to mastheads that were once the core of a billion dollar investment. More>>

Collecting Scalpers: Commerce Commission To Sue Viagogo

The Commission will claim that Viagogo made false or misleading representations: • that it was an “official” seller, when it was not • that tickets were limited or about to sell out • that consumers were “guaranteed” to receive valid tickets for their event • about the price of tickets... More>>

ALSO:

Price Of Cheese: Fonterra CEO Goes Early After Milk Price Trimmed

Aug. 15 (BusinessDesk) - Fonterra Cooperative Group chief executive Theo Spierings is leaving the role early after the world's biggest dairy exporter lowered its farmgate payout and trimmed its dividend to retain cash. More>>

ALSO: