Friday, March 29, 2024

Punters pick the payout positives

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Farmgate cashflows for Fonterra farmers this season and next are now looking good after the 15c/kg lift in milk price and the dividend forecast, ANZ rural economist Con Williams said.
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The payout lift would have a positive effect on this season’s monthly deferred payments from July to October.

Cashflow this season was now estimated at $6.72/kg and, assuming next season opened above $6, the cashflow for next season should be similar, Williams said.

The four Retro payments in July, August, September and October will be increased by 15c/kg.

Williams acknowledged the difficult production season for most farmers, which had come at a higher cost because of the use of more supplementary feed to keep cows milking.

Fonterra expected to be down 3% and New Zealand as a whole 1.5%. 

“Autumn production conditions now look favourable, which will extend days in milk for most farmers, boosting end-of-season production.”

The prospect of a third $6-plus season in a row should raise confidence throughout the dairy industry, and the recent pattern had been two good ones followed by a more difficult one.

ASB rural economist Nathan Penny said the boost in payout forecast late in the selling season was the reason to align his own prediction to $6.55/kg, including some upside potential to $6.60.

Global dairy prices remained firm, especially in the products that mattered most to NZ.

Recovery from weak NZ production early in the season was only gradual, but world demand remained firm.

The trends looked good for next season, for which Penny pencilled in $6.50.

Craigs Investment Partners said it had some confidence that Fonterra could repeat a strong second-quarter trading performance in both the third and fourth quarters.

Therefore it could produce an earnings per share result at the lower end of the current 35c to 45c guidance, and pay the forecast dividend of 25-35c/share.

Craigs said the main elements in second-half performance were expected to be stronger ingredients volumes, better consumer and foodservice margins now price increases had been implemented, and a continuation of positive stream returns.

Second-quarter earnings before interest and tax could have been as high as $380 million.

Forsyth Barr said Fonterra expected consumer and foodservice earnings in the second half to return to the FY2017 level of $600m.

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