Fonterra affirms 2016 payout, on condition

  • 25/11/2015
Fonterra affirms 2016 payout, on condition

By Fiona Rotherham

Fonterra has affirmed its guidance for the 2016 milk payout to farmers, although chairman John Wilson said it was dependent on global dairy prices rising in the first half of next year from current unsustainable levels.

The world's largest dairy exporter has forecast a farmgate milk price of $4.60 per kilogram of milk solids and a cash dividend of 35-to-40 cents per share for a total payout of $4.95/kgMS to $5/kgMS.

Fonterra has faced a challenging year globally with low dairy prices and a continued imbalance in supply and demand, which had a strong impact on the 2015 payout, Wilson told shareholders at their annual meeting today.

However, it was still disappointing that Fonterra's payout was only third-highest among New Zealand's dairy companies, he said.

Wilson had three priorities for the coming year - lifting the dairy payout, driving higher returns for Fonterra, and reviewing the governance structure, which had been put on hold in recent years while the company focused on maximising returns and cutting costs at a time of unprecedented global volatility.

The co-operative had "stood its ground" in the face of strong competition and had 85 percent of the country's milk production, while the number of shareholder suppliers continued to increase, Wilson said.

Milk volumes are expected to be down 5 percent this year, and could fall further, which would mean inventory levels below last season's, he said.

Shareholders could expect to see a significant step-up this year in value-add products as the investment the company has made in recent years starts to pay off, he said.

Shareholders will vote at the meeting on a proposal to slim down the Fonterra board, but Wilson said more time should be given to reviewing governance with an information booklet due out in January.

Farmer consultation is due to start in February with a special meeting to vote on the issue scheduled for May/June.