9 Dec 2015

Fitch wanted Fonterra to cut milk payout

4:04 pm on 9 December 2015

Credit rating agency Fitch has given more details on why it downgraded the rating of dairy giant Fonterra in late October, from AA- to A.

Fonterra sign

Photo: 123RF

In a more detailed report, it said Fonterra's failure to reduce its advance payout to farmers, and its interest-free loan scheme to cash-strapped suppliers, were two key factors in the downgrade.

At the time, Fitch said volatility in global milk prices and Fonterra's weakened business outlook were behind the [ double-notch downgrade].

The downgrade, along with a cut by Standard & Poor's, means it is more expensive for Fonterra to borrow.

Fonterra will give an update tomorrow on its forecast payout of $4.60 a kilo of milk solids for the coming season, and whether it will continue the interest-free loans scheme, which has cost it about $390 million.

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