Farm Ireland

Friday 23 February 2018

Fonterra confident on milk price outlook but advises its farmers to 'budget cautiously'

Fonterra the world's largest dairy cooperative announced its interim results today with revenue up 5pc on the same period last year, and net profit after tax up 2pc.

Revenue was higher at $9.2 billion and normalised EBIT was again over $600 million with net profit after tax of $418 million.

Chairman John Wilson said the Co-operative had a strong first half.

He said the Co-operative continues to get stronger.

WWe have further reduced net debt which is down $793 million or 11pc, and we have a gearing ratio of 46.6% compared with 49.2% in the first half of 2016,” Mr Wilson said.

“Fonterra’s strong balance sheet means we are well placed to develop our markets and position our Co-operative for the future.”

Milk Prices

Milk collection in New Zealand was down 54 million kgMS on the same period last season at 1,053 kgMS.

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“The poor spring in New Zealand saw us forecasting milk collection to be down 7% for the season, but following good rainfall in autumn on-farm conditions are improving which means we are now expecting New Zealand collections for the season to be down by 3pc on last season,” Mr Wilson said.

The Fonterra Board confirmed that the forecast Farmgate Milk Price of $6.00 per kgMS continued to reflect global dairy markets with steady demand and relatively stable prices.

“World dairy prices have continued to show signs of volatility, but we believe that the fundamentals are sound and expect pricing over the balance of the season to remain stable.

However, he also said that Fonterra see some challenges ahead in the second half of the year.

"The additional milk at the end of the season is welcome for our farmers and our management team are focused on ensuring that we get the highest value from this milk.

“The impact of more volatility in product stream returns in our Ingredients business, some tightening of margins in the coming months, and the potential for extra milk in the autumn could result in some pressure on our earnings in the second half," he said.


"We remain confident in our forecast for the Farmgate Milk Price but continue to advise our farmers to budget cautiously," Mr Wilson said.

“The fundamentals of dairy are strong but there will be ongoing volatility in our global markets.

“Our strategy to grow volume and value will continue to underpin our performance in the second half of the financial year,” Mr Wilson said.

The record date for the payment of the dividend is 5 April 2017, and the payment date is 20 April 2017. The Co-operative will continue to offer a dividend reinvestment plan, the strike price at which shares are issued incorporating a discount of 2.5%. Eligible shareholders who wish to participate in the dividend reinvestment plan for this dividend need to submit a notice of participation by 6 April 2017.

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