The slight recovery in dairy earnings, cost cuts and lower production has seen Kiwi dairy giant, Fonterra (FSF), raise its annual earnings forecast a touch.
The company yesterday told stock exchanges each side of the Tasman that it had raised its forecast earnings per share range for the current financial year to NZ45-55 cents, from a previous forecast of NZ40-50 cents.
With a forecast farmgate milk price of $NZ4.60, this lifts the total available payout to $NZ5.05- $NZ5.15 per kilo of milk solids.
Fonterra said it is also increasing the rate at which farmers are paid the co-operative support of 50 cents per kg of milk solids, with the total amount paid up to December going from 18 cents to 25 cents.
The lift came ahead of the results of the results of the fortnightly global auction today.
FSF 1Y – Fonterra back ‘on track’
Fonterra Chairman, John Wilson said Fonterra’s performance in the August 1 to October 31 period 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."
Fonterra is also expecting to cut the New Zealand milk collections by at least 5% this season, equivalent to around 150,000 tonnes of whole milk powder.
Since August, Fonterra has reduced the amount of product it expects to offer on the GlobalDairyTrade platform over the year by 146,000 tonnes.
Margins increased to 23% from 14% in the first quarter, according to Fonterra CEO, Theo Spierings.
"Our first quarter ingredients performance reflects improved product stream returns and margins are tracking well. With less milk this season, and additional capacity, we have taken the opportunity to optimise our product mix."
