Fonterra has announced its half year results, including forecasting a farm gate milk price of NZ$4.70/kg MS.

It is also forecast a cash payout for the 2014/15 season of $4.90 – $5.00 and is estimating a full year dividend of 20-30c/share.

However, it also reported revenues of $9.7 billion – down 14% and net profit after tax (NPAT) $183m, down 16%.

Fonterra also said that volatility continues to influence international dairy commodity prices and given this, it recommends caution with regards to on-farm budgets.

The first half has been subdued for the Co-operative, due to high volatility and challenging global market conditions, resulting in a 14% decrease in revenue, CEO Theo Spierings said.

Fonterra Chairman John Wilson said that given the results achieved in the first half of the year and the continued volatility in international prices, the dairy Co-operative was holding its forecast Farmgate Milk Price at $4.70 per kgMS.

“However, our forecast dividend has been lowered to 20-30c/share, resulting in a forecast Cash Payout of $4.90 – $5.00. The Fonterra Board has declared a 10c interim dividend.

“These half-year results are below our farmers’ expectations, in a period when the Farmgate Milk Price is low and we are reducing the forecast dividend range.

“Our half-year results are a snapshot of tough conditions in dairy with variable production, demand and pricing. There was also the challenge of generating profit from inventory made in the previous financial year when the cost of milk was higher, but sold in the first quarter of the financial year when global dairy prices were falling.

“In New Zealand, milk production got off to an excellent start. A very dry summer in most regions curtailed production in the last three weeks of January, with the Co-operative reducing its milk volume forecast to slightly below last season’s production.

“Our current milk supply forecast for the 2014/15 season has increased to 1,551m kgMS, 2% below the 2013/14 season.

“Oversupply from dairy producing regions around the world in the early months of the financial year saw the trade-weighted GlobalDairyTrade price index hit a five-year low in December. Supply outweighed demand and buyers undervalued milk, which was reflected in prices that declined to unsustainable levels.”


“Our first half year results combined with the current market conditions mean that our expectations for the full year have resulted in an updated forecast dividend range of 20-30c/share (based on our policy of paying 65 to 75% of net profit after tax),” said Mr Spierings.

“We are maintaining our current forecast Farmgate Milk Price.”