Fonterra says strong kiwi keeps forecast payout in check

Friday 5th November 2010

Fonterra kept its forecast milk payout on hold and said the strong kiwi dollar kept it from rising.

The forecast payout was unchanged at $6.60 per kilogram of milk solids, as was the 40 to 50 cents per share forecast distributable profit and the target dividend range of 25 to 35 cents.

Market prices “have held up better than initially expected,” said chairman Henry van der Heyden in a statement. “We’ve also seen the New Zealand dollar strengthen significantly against the US dollar, eroding the value of dairy export returns for our farmers.”

The kiwi dollar is near a 29-month high after the greenback got hammered after a stalled recovery in the world’s biggest economy prompted the Federal Reserve to print US$600 billion over the next eight months to try and revive activity. The kiwi has piggy-backed on Australia’s exposure to a booming Chinese economy, reigniting calls from exporters and manufacturers for the government to take a more interventionist approach to the currency.

Milk prices were flat in the latest online auction, and their resilience underpinned New Zealand’s recovery over the past 15 months. Central bank Governor Alan Bollard expects consumer spending to improve once producers finish repaying debt, and can enjoy the bigger returns they’re achieving.

Fonterra lifted the advance rate schedule by 30 cents to $4.60 per kg of milk solids. The advance rate is the proportion of milk prices that’s paid in advance to farmers during the season.

Businesswire.co.nz

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