Ann: FORECAST: FSF: FONTERRA ANNOUNCES FORECAST C

• Release Date: 31/07/13 10:32
• Summary: FORECAST: FSF: FONTERRA ANNOUNCES FORECAST CASH PAYOUT FOR 2013/14 SEASON
• Price Sensitive: No
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FSF
31/07/2013 08:32
FORECAST

REL: 0832 HRS Fonterra Shareholders' Fund (NS)

FORECAST: FSF: FONTERRA ANNOUNCES FORECAST CASH PAYOUT FOR 2013/14 SEASON

Fonterra Co-operative Group Limited today lifted its Forecast Farmgate Milk
Price for the FY14 season by 50 cents to $7.50 per kgMS and announced an
estimated dividend of 32 cents per share - amounting to a Forecast Cash
Payout of $7.82.

Chairman John Wilson said the higher Forecast Farmgate Milk Price for the new
season reflected continuing strong international prices for dairy.

"At the beginning of this season, our forecast was that dairy commodity
prices would continue at or near current levels until the fourth quarter of
2013.  However, supply constraints in Europe and China during the Northern
Hemisphere spring have contributed to an increase in dairy prices of 3 per
cent over the past two months. In addition, the NZ dollar has weakened
against the US dollar. These factors have contributed to our updated
forecast," said Mr Wilson.

The Co-operative has also confirmed a further increase to the Advance Rate
schedule, starting from $5.50 per kgMS.

"A higher Advance Rate provides our farmer shareholders a strong start to the
season and the opportunity to grow their own farming businesses."

Commenting on the forecast dividend for FY14, Mr Wilson said Fonterra's Board
has amended the Co-operative's dividend policy.

"The Board has approved a new policy that aims to deliver a sustainable
dividend from FY14 onwards.  When setting the dividend, the Board will take
into account short and medium term earnings to deliver a dividend per share
of between 65-75 per cent of adjusted Net Profit after Tax over a period of
time. The dividend remains at the Board's discretion, and subject to market
conditions and Fonterra's financial position.

"Additionally, from FY14 we are adopting a qualitative earnings guidance
approach, rather than the previous quantitative earnings per share guidance.

"The changes mean we will provide more market commentary - but will no longer
put numbers around future earnings per share.  This new policy will enable
the business to provide a longer term view on any potential volatility in
earnings," said Mr Wilson.

Chief Executive Theo Spierings said international dairy trade growth is
currently being led by strong demand for powders (combined whole milk and
skim).

"This trend, relative to prices for cheese and casein, currently would have a
short term negative influence on product mix returns during the first half of
FY14.

"As we drive for growth in our consumer businesses, during the first half of
FY14 we are likely to have to absorb some of the expected substantial
increases in the cost of goods arising from current high commodity prices,
and this could have an impact on margins.

"Taking into account the headwinds we face and current market volatility, the
FY14 estimated dividend of 32 cents per share may be outside the 65-75 per
cent range.

"We will provide an update on business performance when we announce our
Annual Result on 25 September 2013," said Mr Spierings
End CA:00239119 For:FSF    Type:FORECAST   Time:2013-07-31 08:32:04