Fonterra is increasing its forecast earnings per share, which will increase its total forecast cash payout to $4.95-5.00/kg of milk solids (MS).

The co-op is increasing its forecast earnings per share range for the current financial year to 45-55c.

With a forecast Farmgate Milk Price of $4.60, this lifts the total available for payout to $5.05-5.15/kgMS and would currently equate to a total forecast cash payout of $4.95-5.00/kgMS after retentions, the co-op announced.

Fonterra is also increasing the rate at which farmers are paid the co-op support of 50c/kgMS, with the total amount paid up to December going from 18c to 25c.

Chairman John Wilson said performance in the period August 1 to October 31, 2015 built on the strong second half of the 2015 financial year.

“While it is tough on-farm due to low global milk prices, farmers will welcome the ongoing improvement in Fonterra’s performance delivering increased returns.

Performance is well ahead of last year and we are hitting our targets on gross margins and operating and capital expenses.

“At the same time, the acceleration of business transformation initiatives is generating significant cash savings.

“We are on track, and therefore able to lift our forecast earnings per share range,” he said.

At this stage of the season based on the dividend policy, management would recommend at the end of the financial year an annual dividend of 35-40c/share, which would then be subject to Board approval, according to the co-op.

This in turn, would equate to a total forecast cash payout of $4.95-5.00/kgMS.

“The performance and business transformation savings mean we are also able to increase the December co-op support payment and payments will now be completed by April which means that farmers have access to more of that support earlier,” Wilson said.

Chief Executive Theo Spierings said Fonterra co-op support – equalling 50c/kgMS on share-backed production from June to December through a loan that is interest-free until May 31, 2017 – is supporting our farmers in a low milk price environment.

“Milk volumes and inventory the co-op is continuing to forecast a reduction in milk collections in New Zealand for the current season of at least 5%, which is equivalent to around 150,000m tonnes of Whole Milk Powder,” Spierings said.