FCG
24/09/2014 08:30
FORECAST
REL: 0830 HRS Fonterra Co-operative Group Limited
FORECAST: FCG: Fonterra Revises 2014/15 Forecast Milk Price and Dividend
24 September 2014
FONTERRA REVISES 2014/15 FORECAST MILK PRICE AND DIVIDEND
Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk
Price for the 2014/15 season from $6.00 to $5.30 per kgMS, and increased and
widened the estimated dividend range from 20-25 cents per share to 25-35
cents - amounting to a forecast Cash Payout of $5.55-$5.65 for the current
season.
Chairman John Wilson said the lower forecast Farmgate Milk Price reflected
continuing volatility, with the GlobalDairyTrade price index declining 6 per
cent in the past two trading events.
"The market is currently influenced by strong milk production globally, the
impact of Russia's ban on the importation of dairy products, and the levels
of inventory in China. Some relief has been provided by exchange rates, with
the NZ dollar recently showing some signs of falling against the US dollar
"Under the current market conditions, there is further downside risk.
However, the forecast reflects expectations that prices will increase in the
medium term," Mr Wilson said.
Chief Executive Theo Spierings said the estimated dividend range reflected
the positive impact of a lower forecast Farmgate Milk Price on product
margins but also significant volatility in commodity prices.
"A lower forecast Farmgate Milk Price reduces input costs in our consumer and
foodservice businesses. In turn, we do expect to deliver increased returns as
a result of a recovery in margins on our products.
"In addition, stream returns for Non-Reference Commodity Products such as
cheese and casein are currently making a positive earnings contribution, but
it is still very early in the financial year.
"With volatility in commodity prices, a wide range of outcomes are possible
in relation to stream returns. The wider dividend range reflects this
volatility, and at this stage of the financial year, it is not realistic to
be able to accurately forecast the final result for the year within a
narrower range."
Mr Wilson said that the forecast Farmgate Milk Price remained reliant on
increasing dairy prices in the medium term.
"The forecast Farmgate Milk Price is reduced based on current estimates of
future pricing. There remains significant volatility in international dairy
commodity prices and given this, this forecast is our best judgment at this
time.
"As always, we recommend caution with regards to on-farm budgets in this
environment of continuing uncertainty."
- ENDS -
Note: currency is New Zealand dollars unless otherwise stated.
For further information contact:
Mike Burgess
Fonterra Communications
Phone: 027 502 8830
24-hour media line
Phone: +64 21 507 072
End CA:00255602 For:FCG Type:FORECAST Time:2014-09-24 08:30:19
