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Fonterra ended the first half of its 2017 financial year with net profit after tax up 2%, reaching $418m.
The New Zealand-based co-op had a revenue of $9.2bn, recording a 5% rise.
John Wilson, chair of the co-op, said the half year dividend of 20c per share, which is due to be paid in April, reflected the strong results.
“The co-operative continues to get stronger. We have further reduced net debt, which is down $793m or 11%, and we have a gearing ratio of 46.6% compared with 49.2% in the first half of 2016.
“Fonterra’s strong balance sheet means we are well placed to develop our markets and position our co-operative for the future,” he said.
Warnings of ongoing volatility
Milk collection in New Zealand was down 54m kgMS on the same period last season at 1,053 kgMS. Fonterra had forecast milk collection to be down 7% for the season.
“But following good rainfall in autumn, on-farm conditions are improving, which means we are now expecting New Zealand collections for the season to be down by 3% on last season,” John Wilson said.
The Fonterra board confirmed that the forecast farmgate milk price of $6.00 per kgMS continued to reflect global dairy markets, with steady demand and relatively stable prices.
“World dairy prices have continued to show signs of volatility, but we believe that the fundamentals are sound and expect pricing over the balance of the season to remain stable.
“Our co-operative has a forecast cash payout for this season of $6.40. This is made up of a forecast farmgate milk price of $6.00 per kgMS and a target full-year dividend of 40c per share. Our forecast cash payout reflects a 54% increase in the farmgate milk price, compared to last season, and consistent earnings,” Wilson said.
He added that the co-op remains positive but cautious, and advised its dairy farmers to budget cautiously.
“The fundamentals of dairy are strong but there will be ongoing volatility in our global markets,” the co-op chair said.
Change in dairy industry rules for the co-op
Meanwhile in New Zealand, dairy farmers have been threatening to leave the Westland co-op and move to Fonterra due to it’s better milk price forecast.
Under dairy industry regulations, Fonterra is required to accept all applications to supply with only two limited exceptions – a minimum volume of 10,000kg milk solids (116,000l) and transport costs not exceeding the most expensive existing farmer.
However, a change in processing rules means Fonterra will no longer have to accept all milk offered, which it said is no longer necessary or efficient.
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