But while it has held the dividend guidance at 25-30 cents a share it indicated its earning could be slightly below that range resulting in a dividend of 10c, already paid in April.
Monaghan wasn’t specific on the co-op’s reasons for the backdown and didn’t give figures but in a statement to the NZX yesterday Fonterra said it was working on its full-year accounts for last season.
While various factors were mentioned the co-op seemed surprised in finalising its accounts that it margins had been squeezed tighter than anticipated.
“It is important for our co-operative to have a strong balance sheet and, as we indicated in May, the higher milk price, which is good for our farmers, has put pressure on Fonterra’s earnings and therefore our balance sheet in a year which was already challenging due to the payment to Danone and the impairment of the co-operative’s Beingmate investment.
“You never want to have to reduce the milk price at the season’s end but it is the right thing to do and $6.70 remains a strong milk price.
“The board has made these decisions in the best long-term interests of its farmer shareholders and unitholders,” he said.
“Maintaining a strong balance sheet has helped us to support farmers during tough seasons through our co-operative support loan and being able to bring forward the advance rate schedule and get money to farmers earlier in the season.
“We need to do everything within our control to keep these options on the table for when farmers need them.
“This means keeping our balance sheet strong.”
Monaghan said he wants to be upfront with farmers and unitholders that to achieve that the board departed from the amount calculated under the farmgate milk price manual.
That is permitted in Fonterra’s constitution.
“During the process of closing our books for the financial year-end, the need for these actions has become clear.
“Our forecast performance is not where we expected it would be.
“While the numbers are not finalised, our margins were less than we forecasted right across our global ingredients and consumer and food service businesses.”
The co-operative’s full year results will be announced on September 13.
The halt on trading of Fonterra securities was lifted at the time of the announcement.
