Fonterra Holds Payout Forecast for 2010/11

Fonterra reaffirmed today its forecast payout range before retentions for the 2010/11 season would be $6.90-$7.10. This combines an unchanged forecast Milk Price of $6.60 per kilogram of milksolids (kgMS) and an unchanged forecast Profit After Tax of 30-50 cents per share.

Fonterra Chairman Sir Henry van der Heyden said the Board had met and confirmed the Milk Price and Profit After Tax forecasts for the 2010/11 season.

Sir Henry reiterated that there was considerable volatility in both international dairy commodity prices and the New Zealand dollar. Although international prices had declined in recent months, there were a number of factors signalling a potential improvement in prices later in the year. Given this, the Board had decided to hold the current Milk Price forecast.

“While there is still some uncertainty in global markets, if current commodity pricing and foreign exchange rates were at current levels for the rest of the season, then we estimate the 2010/11 payout would be marginally lower than our current forecast. However, we are holding the forecast payout of $6.90-7.10 as we are seeing signs of potential strengthening of international prices further into the season.”

Chief Executive Andrew Ferrier said Fonterra had completed its budget process in late July and expected its Profit After Tax result to be at the higher end of the 30-50 cent range.

Mr Ferrier said the current season was still at an early stage and the outlook finely balanced. “On the one hand, the New Zealand dollar remained relatively strong, prices for dairy ingredients had fallen from their April peak and there is some evidence global economic growth is slowing.

“On the other hand, weather in Europe, Russia, Pakistan and parts of China has affected agricultural production, although the extent of the impact on dairy is unknown. The Russian wheat export ban has contributed to a lift in prices for grain feed, which could lend support to dairy prices.

“The fundamentals for global markets continue to point to balanced supply and demand.”

There is no change to the 2010/11 advance rate schedule, and the opening advance will stay at $4.30 per kgMS. Fonterra’s annual results and final payout for the 2009/10 season will be released on September 23.