Payout forecast reconfirmed but income up
Fonterra's forecast payout for the current season is staying at the $4.55/kg of milksolids (MS) level announced earlier in the year. But there has been a 10c/kg MS increase in profit which compensates for a similar fall in the milk price.
Fonterra chairman, Henry van der Heyden, said the strength of the New Zealand dollar against the US currency since May was putting downward pressure on the milk price.That forecast assumed a level of US59c to the New Zealand dollar.But there were tentative signs of strengthening demand and firming prices for some products in international dairy markets.
Fonterra chief executive Andrew Ferrier, said the 22 percent increase in the forecast profit from 45c to 55c was the result of continued improvements in the performance of the consumer businesses and lower working capital requirements and funding costs. Acquisitions in Australia were having a positive impact on earnings and the cooperative was reducing operating expenses and freeing up cash for business priorities.
"That means we have some capital constraints but the flip side is that, with inflationary pressures easing and lower interest costs, we're starting to see the payback from this disciplined effort across the business," he said.
Last season's forecast payout remains on track for $5.20/kg MS with the final figure to be confirmed in September.There are lower projections for milk supply this season as the result of cold and wet winter weather conditions affecting pasture growth, and tight cash flows reducing farm inputs.
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