16 May 2016

Fonterra to help cash-strapped farmers with early payout

1:59 pm on 16 May 2016

Fonterra has confirmed it will pay part of its forecast dividend early to support cash-strapped dairy farmers.

Fonterra ceo Theo Spierings

Fonterra ceo Theo Spierings Photo: RNZ / Diego Opatowski

The dairy co-operative said a solid performance in the nine months to the end of April meant the co-op could confirm the 10 cents per share payout - bringing total dividends so far to 30 cents.

Fonterra chair John Wilson said the payment will be made on 7 June.

"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."

Although every farmer was different, it would be likely an extra $13,000 or so would go into the average farmer's bank account.

A further 10 cents was expected to be paid out in August, depending on the company's financial performance, he said.

"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."

Fonterra also revealed margins on its ingredients side - including cheese - had improved 16 percent, despite weaker milk collection.

Chief executive Theo Spierings said its focus was on value-add products.

"Our determination to convert as much milk as possible into the highest-returning products has resulted in an additional 300m litres on a liquid milk equivalent (LME) basis going to consumer and foodservice products in the past nine months.

"The continuing strong performance of our consumer and food-service businesses is reflected in gross margins which have increased to 28 percent, supported by volume growth of nine per cent and lower input costs," he added.

The co-op said ongoing financial discipline and the business' performance were resulting in strong cash flow.

Fonterra said it was scheduled to provide its opening forecast for the new 2016/17 season by the end of May.

The latest GlobalDairyTrade auction is out on Wednesday morning.

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