Fonterra lifts forecast milk pay-out by 30 cents
by Paul McBeth
Dec. 10 (BusinessDesk) – Fonterra Cooperative Group, the world’s biggest dairy exporter, has lifted its forecast pay-out to farmers by 30 cents per kilogram of milk solids (kgMS) as international prices stay buoyant.
However, it remains concerned about the strength of the New Zealand dollar.
The 2011 payment is expected to be $6.90 per kgMS, up from an earlier estimate of $6.60, and distributable profit will probably be in a range of between 40 cents and 50 cents a share.
The exporter held its forecast distributable profit range at between $550 million and $690 million in the year ended July 31.
“International dairy market prices have generally held up better than initially expected when we made the opening forecast back in late May,” Ferrier said in a statement.
“Offsetting this good news has been a stronger New Zealand dollar which is eroding the value of dairy export returns for our farmers.”
Milk powder prices rose 1.6% in Fonterra’s latest online dairy auction, and ongoing global demand for dairy products has helped underpin New Zealand’s slowly emerging economic recovery as farmers are able to repay debt on the back of their bigger receipts.
Fonterra is monitoring the current drought conditions, and will update the board on expected production levels. Chairman Henry van der Heyden said the dry weather could add to production costs if it persists.
“It’s still early in the season, and some good falls of rain could help a lot, but milk production in the North Island is declining and we know farmers in some regions are struggling,” van der Heyden said.
Independent valuer Grant Samuel estimated a restricted market value range for Fonterra shares at between $4.11 and $4.78.
The mid-point is $4.45 a share. The exporter’s board estimates fair value to be $4.52 a share.
Fonterra will allow share trading between farmers after they voted in favour of capital structure changes to inject cash into the cooperative.
Almost three-quarters of shareholders bought an extra 13.5 million tradable shares worth $61 million when the offer closed at the end of September.