FSF
10/12/2015 08:30
FORECAST
PRICE SENSITIVE
REL: 0830 HRS Fonterra Shareholders' Fund (NS)
FORECAST: FSF: Fonterra maintains 2015/16 Farmgate Milk Price
Fonterra maintains 2015/16 Farmgate Milk Price
Fonterra Co-operative Group Limited today maintained a forecast Farmgate Milk
Price of $4.60 per kgMS. Along with the November announced estimated Earnings
Per Share range of 45-55 cents, this amounts to a total available for payout
of $5.05-$5.15 kgMS and would currently equate to a total forecast Cash
Payout of $4.95-$5.00 .
Fonterra is required to consider its forecast Farmgate Milk Price every
quarter as a condition of the Dairy Industry Restructuring Act (DIRA).
Chairman John Wilson said the stable forecast reflected the Board and
management's view that international prices would continue to improve in the
first half of next year.
"We are looking out over the next nine months and basing our forecast on the
view that current, unsustainably low prices will continue to impact
production levels globally. We support the consensus view in the market that
an improvement will take place, but the market remains volatile. While there
are signs of a recovery, particularly in China, we still need the imbalance
between supply and demand to correct.
"That imbalance is starting to reduce with year to date production in the
United States up by only one per cent and slowing, and New Zealand volumes
expected to be down by at least six per cent over the current season. In the
EU, however, farmers are continuing to push production, currently up one per
cent."
Fonterra's Board also reviewed the Fonterra Co-operative Support loan. The
loan was made available on production from 1 June to 31 December. The loan of
50 cent per kgMS is interest-free until 31 May 2017 with repayments triggered
when the Farmgate Milk Price exceeds $6 per kgMS.
Mr Wilson said the Board's scheduled review had weighed up the improved
Farmgate Milk Price and higher Earnings Per Share forecast since the loan was
launched, when the milk price was at $3.85, and the need for financial
discipline from the Co-operative. The Board had decided not to continue the
Co-operative Support loan for milk collected after 31 December, but will
monitor conditions and assess the need to continue the support if market
conditions changed later in the season.
"We will provide some $390 million in support to around 75 per cent of our
farmers through the most productive half of the season, including the peak.
Farms typically produce 60 per cent of their milk in the first half, with
production beginning to taper off from December, so we have provided support
when it is needed the most."
-ENDS-
Note: currency is New Zealand dollars unless otherwise stated.
For further information contact:
Simon Till
Director Capital Markets
Phone: +64 21 777 807
End CA:00274888 For:FSF Type:FORECAST Time:2015-12-10 08:30:11
