Fonterra has announced that it is to pay part of its forecast final dividend to its farmers earlier, in order to support them during a time of “extremely tight on-farm cash flows”.
Fonterra Chairman John Wilson said that a solid performance during the nine months to April 30 in the current financial year enables Fonterra to declare the 10c/share dividend.
Payment will be made on June 7, bringing dividend payments so far this year to 30c/share.
“While the milk supply and demand imbalance continues to impact global milk prices and our forecast farmgate milk price, the business is delivering on strategy and has maintained the good performance levels seen in the first six months of the financial year.”
The earlier payment meets our goal of getting cash to farmers earlier in winter when they need it, as we signalled at our interim results announcement.
“Our total forecast dividend is 40 cents per share for the year. We intend to declare another 10 cents per share dividend in August, subject to financial performance continuing to support the current forecast earnings per share range of 45 to 55 cents,” Wilson said.
The Chairman said that its forecast New Zealand milk collection for the current season is 1,558m kgMS, which is 3% lower than last season.
Meanwhile, Chief Executive Theo Spierings said despite lower milk collections, ingredients gross margins improved to 16%.
“We have continued to optimise our product mix by adjusting volumes away from reference products, such as whole milk powder, towards non-reference products, such as cheese and casein, to take advantage of the relative pricing.
“A strong sales performance has resulted in ingredients inventory volumes being 11% lower than the same period last year.”
Outlook
Looking ahead to the final three months of Fonterra’s financial year, Wilson said Fonterra’s good operating performance was expected to continue.
“We are maintaining our earnings per share range of 45-55 cents, and our forecast total dividend of 40 cents per share.”
He said that the range reflects assumptions about:
- Normal impact of end of season milk production on NZ ingredients earnings;
- Timing of completion of announced business sales in Australia;
- No further geopolitical deterioration in Venezuela and Brazil.
“Ongoing financial discipline and the business’ performance are resulting in strong cash flow – we are on target to reduce gearing to between 40 and 45 per cent by year-end.
“We will be providing our opening 2016/17 season forecast Farmgate Milk Price for our farmers at the end of May, as we do every year in line with our obligations under the Dairy Industry Restructuring Act.”
Eligible shareholders and unit holders who want to participate for this dividend and distribution need to submit a notice of participation by May 31, 2016.
