The company said the price change better reflected the reality of the supply and demand imbalance that was affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar.
Fonterra Australia is also offering its suppliers an interest-bearing support loan of up to 60c/kg MS that is linked to a supply commitment and is repayable from 2018.
Fonterra expected the revised milk price would reduce the cost of goods sold for Fonterra Australia by about A$48 million but this would be subject to a number of factors including final milk volumes for the year.
This would contribute to the reduction of operating losses in the Australian ingredients business this financial year.
Fonterra’s current earnings guidance range of NZ$0.45-0.55/share reflects a range of possible impacts through to the end of the financial year, including the completion of announced business sales in Australia.
As a result, Fonterra is maintaining its current guidance range and will continue to take a responsible approach.
