Fonterra hikes forecast farmgate price 30 cts on strong international prices

Tuesday 27th August 2013

Fonterra Cooperative Group, fending off threats to its international reputation as a safe food producer, has hiked its forecast payout to farmers in the 2014 season by 30 cents on the strength of international dairy prices.

The Auckland-based dairy exporter expects to pay $7.80 per kilogram of milk solids to its farmer-shareholders, up from previous estimates of $7.50 per kgms, and maintained its predicted dividend of 32 cents per share, it said in a statement. Chairman John Wilson said the increase reflected continued strength in global prices.

"Current market views support commodity prices remaining at historically high levels longer than previously forecasted," Wilson said. "The two most recent GDT (GlobalDairyTrade) events have seen prices hold and significant volumes sold."

Fonterra expects to pay $5.80 per kgms to shareholder-suppliers in the 2013 season which finished at the end of July, with a forecast dividend of 32 cents per share. It will announce its annual result on Sept. 25.

Units in the Fonterra Shareholders' Fund, which gives outside investors exposure to the company's earnings stream, increased 0.2 percent to $6.87, and have slipped 2.5 percent this year.

Earlier this month the world's biggest dairy exporter found itself in the midst of an international food scare where some of its whey protein concentrate was contaminated with bacteria that could cause botulism, and it has faced temporary import bans on some of its products in certain jurisdictions.

Last week it was forced to close its Sri Lankan offices in the face of nationalist protests, and is working on how to prove its long-term commitment to that market.

The furore has sparked four separate inquiries, two by Fonterra, one by the Ministry for Primary Industries and a Ministerial review in a bid to shore up New Zealand's reputation as a safe food producer.

BusinessDesk.co.nz

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