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Fonterra announces forecast for 2010/11
Fonterra have announced an opening forecast payout before retentions for the 2010/11 season of $6.90-$7.10.
This payout combines a forecast milk price of $6.60 per kilogram of milk solids (kgMS) and forecast distributable profit of 30–50 cents per share.
Fonterra chairman Sir Henry van der Heyden said the opening milk price forecast represented an increase of 50 cents on the forecast milk price for the current (2009/10) season.
Sir Henry said the board was forecasting a distributable profit for 2010/11 of 30–50 cents a share, though an updated forecast will follow the group’s annual budgeting process in late July. He said that the board currently intends to make retentions from this distributable profit, in line with Fonterra’s dividend policy which is to retain 25–35% of total distributable profit in the cooperative.
Based on these forecasts and targets, Fonterra farmer-shareholders on average would receive a total payout before retentions of $6.90-$7.10 for each kilogram of milk solids backed by a Fonterra share.
Sir Henry said if international dairy prices and foreign exchange rates were to hold to current levels for most of the coming year, then it’s possible that the 2010/11 payout could be well over $8.00. However, the forecast payout has been set at $6.90–7.10, reflecting a more cautious outlook given the high degree of volatility in the market.
“That’s what the market looks like right now, but we know that there’s substantial volatility in the market,” he said. “The reality is that we’re seeing big swings in foreign currencies and turmoil in some economies. These factors could have a big impact on demand for dairy products and the prices we ultimately realise.
“With this in mind, we believe a payout forecast in the range of $6.90-$7.10 is appropriate. Accordingly, farmers doing their budgets for the coming season should base their planning around a payout broadly in line with this year. If prices hold up throughout next season, we could be looking at a significant improvement during the course of the year. But at this stage, in the current volatile environment, it wouldn’t be sensible to count on this.”
Read the full Fonterra statement at this link.
Source: Fonterra
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