FSF
28/01/2016 08:30
FORECAST
PRICE SENSITIVE
REL: 0830 HRS Fonterra Shareholders' Fund (NS)
FORECAST: FSF: Fonterra Revises 2015/16 Forecast Milk Price
Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk
Price for the 2015/16 season from $4.60 per kgMS to $4.15 per kgMS.
When combined with the earnings per share range of 45-55 cents, this means a
total available for payout of $4.60-$4.70 per kgMS and would currently equate
to a forecast Cash Payout of $4.50-$4.55 per kgMS to our farmers after
retentions.
Chairman John Wilson said global economic conditions continue to be
challenging and are impacting demand for a range of commodities, including
dairy.
"Key factors driving dairy demand are declining international oil prices
which have weakened the spending power of countries reliant on oil revenues,
economic uncertainty in developing economies and a slow recovery of dairy
imports into China. In addition, the Russian ban on European Union dairy
imports continues to push more product on to the world market.
"There is still an imbalance between supply and demand which continues to put
pressure on global milk prices. Since last September, prices on
GlobalDairyTrade for Whole Milk Powder (WMP) have fallen 12 per cent, and
Skim Milk Powder (SMP) prices are down 8 per cent.
"Although New Zealand farmers have responded to lower global prices by
reducing supply, that has yet to happen in other regions, including Europe,
where milk volumes have continued to increase.
Chief Executive Theo Spierings said while global demand remained sluggish,
Fonterra supported the general view that dairy prices will improve later this
calendar year.
"However the time frame for supply and demand rebalancing has moved further
out and largely depends on a downward correction in EU supply in response to
the lower global prices. These prices are clearly unsustainably low for
farmers globally and cannot continue in the longer term.
"It is important to state that despite the current challenges, we have
confidence long-term international dairy demand will continue its expansion
due to a growing world population, increasing middle classes in Asia,
urbanisation and favourable demographics.
"While a unique series of global issues are impacting the forecast Milk
Price, the business is performing well, as outlined in our business update in
November, and is on track to generate improved dividend returns. Fonterra
has remained focused on reducing costs, increasing efficiencies and shifting
more milk into higher value products," said Mr Spierings.
Mr Wilson said: "The reduction in the forecast Farmgate Milk Price will be
very tough on our farmers. As we confirm the Co-op's performance for the
first half of the financial year, we will look at the best way to help our
farmers' cash flows, underpinned by the expected improvement in dividend
returns and the financial strength of the Co-operative.
"We will continue to keep our farmers updated as the season progresses," said
Mr Wilson.
Note: currency is New Zealand dollars unless otherwise stated.
- ENDS -
For further information contact:
Connie Buchanan
Fonterra Communications
Phone: +64 22 698 5602
24-hour media line
Phone: +64 21 507 072
End CA:00276880 For:FSF Type:FORECAST Time:2016-01-28 08:30:05
