NZ’s Fonterra increases milk price payout, full-year profit soar

Shares in Fonterra’s fund, which provides investor exposure to the farmer-owned dairy exporter, climbed to their highest in five months on Wednesday and closed at $5.24.


It had also been something of a transition year with regard to the co-operative’s most recent capital investments.

Fonterra has announced a profit of more than half a billion dollars, just days after confirming 750 jobs will be axed.

The ever optimistic ASB dairy analysts lifted the predicted payout to $5/kg, and suggested production will drop by 5% over last years figures, on the back of a slow spring and reduced cow numbers.

Improved second-half results were driven by a strong focus on cash and costs, chief executive Theo Spierings said in a statement.

Spierings said demand had been affected by geopolitical turmoil in the Middle East and Russian Federation, Ebola in Africa, falling oil prices and, most crucially, a slowdown in China, which had previously fuelled a massive boom in dairy products.

Profit margins for USA milk producers have narrowed but remain mostly positive as lower feed prices have offset much of the impact from declining milk prices.

Mr Spierings said the business review was an ongoing process across the whole organisation to identify areas where the co-operative could find more efficiencies and improve future performance.

Revenue fell 15 percent to NZ$18.8 billion in the year ended July 31 as global prices slumped, the company said.

Net profit after tax $506 million, up 183%.

“It’s been challenging because we’ve seen dairy prices move so dramatically down over the 2014-2015 year”, says Fonterra chairman John Wilson.

That would bring the total payout to farmers to between $NZ5 and $NZ5.10/kgMS, including forecast earnings per share of NZ40 cents to NZ50 cents. Pay-out levels need to be starting with a $6 number for farmers to be making money, he said. This is reflected in Fonterra lowering its forecast milk production for the season.

“We’ll still keep farming very tightly to get ourselves out of this loss”.

The cooperative added four kitchens in China to teach chefs from bakeries, cafes and pizzerias how to incorporate dairy into their recipes, aiming to boost their use of Fonterra branded products such as Anchor cheese.

Dairy NZ estimated farmers would require an extra $100,000 over the season.

“It’s a step in the right direction, but it doesn’t make for a great season”.

Its payout for Australian farmers remains unchanged at $5.60.

Ryman Healthcare rose 1.4 percent to $7.35 and Meridian Energy gained 1.4 percent to $2.255.

However, it would likely mean that farmer pessimism had “bottomed out”.


Fonterra’s management has delivered a good result under extremely tough circumstances.

Fonterra chief executive Theo Spierings says the past year has been one of the toughest has seen for dairy