27 Feb 2020

Fonterra reaffirms farmgate milk price forecast

12:55 pm on 27 February 2020

Fonterra says it remains confident about its forecast farmgate milk price range, despite the impact of the coronavirus outbreak.

Fonterra's interim chief executive Miles Hurrell discussing the annual results.

Fonterra chief executive Miles Hurrell. Photo: RNZ / Dan Cook

After reviewing the 2019-20 price, the co-operative said it had decided to maintain its current forecast range of $7-$7.60 per kilogram of milk solids. It was also maintaining its underlying earnings guidance of 15-25 cents per share.

Chief executive Miles Hurrell said the Covid-19 situation was very fluid and uncertain.

However, he said Fonterra had already contracted a high percentage of its 2020 financial year's milk supply which was helping it manage the disruption of trade with China.

"The momentum we saw in the first three months of the financial year has continued, and as we approach the interim results our underlying earnings are tracking well.

"However, given the potential significant risks that could arise from coronavirus in the second half, we are taking a prudent approach and maintaining our full-year forecast earnings range," he said.

Hurrell said Fonterra's Greater China team was trying to keep operations running as smoothly as possible, but there had been a slow down in processing of containers at ports and people in China were continuing face movement restrictions due to the outbreak.

"This means many restaurants and food outlets are closed, which is having a major impact on the operations of our Foodservice customers. Our sales teams are working with these customers to help them where they can."

Hurrell said the company would provide a further update on the impact of coronavirus on its business when it announced the co-op's interim result on 18 March.

The company has also revised its forecast milk collections for the 2020 season down from 1,530 million kgMS to 1,515 million kgMS.

Hurrell said this is because of the weather conditions across several parts of New Zealand.

"We have recently seen a reduction in milk collections and our farmers are facing ongoing challenging weather. We'll continue to work with them to ensure that if they need extra support that they are able to access it."

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