By Fiona Rotherham and Tina Morrison
Fonterra Cooperative Group, the world's largest dairy exporter, has said the cost of its loan support package to farmers struggling with a low dairy payout will be $390 million.
Speaking at the Fonterra Shareholders' Fund annual meeting in Auckland today, chief financial officer Lukas Paravicini reassured unit-holders that the loan package made no difference to shareholders' dividends because it would be repaid over time.
The loan is being funded from working capital after one-off savings from the cooperative's transformation programme began last December and Paravicini said there was a $20m lost opportunity cost from what the company could have saved on interest paid on its borrowings if it had used that money on further reducing debt instead.
Some 76 percent of the dairy giant's 10,500 farmer suppliers have taken up the loan for an additional 50 cents per share-backed kilogram of milk solids for production through to December.
The board will decide next month whether to extend the package beyond December, depending on market conditions.
The loan is interest-free for two years and doesn't have to be repaid until the farmgate milk price or advance rate hits above the $6/kgMS mark.
The forecast payout for the 2016 season is $4.60.kgMS.
Fund chairman John Shewan, who stood for re-election for the first time since the fund was set up three years ago, said it had achieved what it was set up to do although the past year had been challenging in terms of returns. Unitholders were paid a 25 cent dividend last year while 35 cents to 45 cents has been forecast for the 2016 year.