Friday, March 29, 2024

Fonterra record payout on track

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Fonterra is on track to deliver a record milk payout to its farmers in the coming season, the co-operative’s chairman John Wilson has told shareholders at its annual meeting in Southland. The chairman received a relatively easy ride from around 300 shareholders who turned out for the meeting earlier today at Fonterra’s Edendale factory.
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Wilson said the board’s next meeting in early December would revisit the payout forecast which at the moment stands at $8.30kg milksolids (MS) with an estimated dividend of 32 cents for fully shared-up farmers.

“At the moment this season looks likely to deliver a record payout to our farmers,” he said.

Global demand for milk products remained healthy, while rival exporters were increasing production only gradually.

Chief executive Theo Spierings said the downside of strong demand for dairy commodities was increasing pressure on Fonterra’s NZ Milk Products division where profit margin remained under pressure.

To illustrate his point, Spierings said if the division were to pass on to consumers of a two litre bottle of milk in New Zealand the full price paid to farmers for their milk, the retail price would need to increase from $4 to $6 and the co-operative would be facing a media storm.

“And that would not be the worst of it…we would see the volume of dairy consumption in NZ going down very fast.”

Spierings reassured shareholders that Fonterra was pushing ahead with changes to its business practices in the wake of this year’s botulism scare.

It would review progress against the recommendations of recent inquiries in the middle of next year and again nine months after that.

Work remained to do in China following the scare, Spierings conceded.

'At the moment this season looks likely to deliver a record payout to our farmers.'

Theo Spierings 

Fonterra chief executive

More than 80% of its consumers there heard initial reports of potential contamination of dairy products sourced from Fonterra but only 40% were aware these were based on test results later proved to be false.

The co-operative was also moving to turnaround the Australian business where strong competition for milk from rival co-operative Murray Goulburn and discounting by retailers had put margins under pressure and led to a $50m loss in the last financial year.

Spierings said Fonterra had stripped costs out of the business there.

He said Fonterra saw participation in the consolidation of the Australian industry where a number of players are vying for control of Warrnambool Cheese and Butter as vital to its interests.

“Australia is in our backyard. If we give up on our backyard then we are going to find that we have others moving in to our front yard.”

Fonterra recently upped its stake in Bega Cheese which is in a three-way battle for control of Warrnambool.

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