Fonterra revises milk price and dividend guidance

The New Zealand dairy cooperative is reducing last season’s 2017/18 forecast Farmgate Milk Price to NZ$6.70 per kgMS (US$4.41) from NZ$6.75 per kgMS (US$4.44).

The previously announced 25-30 cents guidance range has been held but Fonterra said it will be at or slightly below this range, and it is likely the full year dividend will be the 10 cents already paid in April.

Price ‘still strong’

Chairman John Monaghan said, “It is important for our cooperative to have a strong balance sheet and, as we indicated in May, the higher milk price, which is good for our farmers, has put pressure on Fonterra’s earnings, and therefore our balance sheet in a year which was already challenging due to the payment to Danone and the impairment of the cooperative’s Beingmate investment. ​

“You never want to have to reduce the milk price at the season’s end, but it is the right thing to do and $6.70 remains a strong milk price,”​ Monaghan said.

He added that maintaining a strong balance sheet has helped Fonterra support farmers during tough seasons through its Co-operative Support Loan and being able to bring forward the Advance Rate Schedule and get money to farmers earlier in the season.

Margins less than forecast

“We need to do everything within our control to keep these options on the table for when farmers need them. This means keeping our balance sheet strong,”​ he noted.  

“During the process of closing our books for the financial year end, the need for these actions has become clear. ​

“Our forecast performance is not where we expected it would be. While the numbers are not finalized, our margins were less than we forecasted right across our global Ingredients and Consumer and Foodservice businesses.”                                           ​

Fonterra’s full year results will be announced on September 13, 2018.