29 Mar 2012

Fonterra says outlook remains strong

2:11 pm on 29 March 2012

Fonterra sees increasing world dairy production and a softening of prices as a short-term issue and says the long-term outlook remains very strong.

The dairy cooperative has announced an 18% increase in its half-year net profit of $346 million.

That has driven by a 10% increase in milk supply in New Zealand, leading to record production and export volumes, along with continued high demand for dairy ingredients.

Increased milk production in other parts of the world has contributed to lower prices in recent global dairy trade auctions.

But Fonterra chairman Sir Henry van der Heyden says in the longer term, demand will continue to outstrip supply, especially in emerging and Asian markets.

Fonterra chief executive Theo Spierings says global demand for milk is forecast to grow by more than 100 billion litres by 2020. New Zealand expected to contribute only 5 billion litres of that additional supply.

Mr Spierings says Fonterra's strategy is to continue concentrating on the fast-growing emerging markets of China, other Asian countries and Latin America.

It will use local milk supply in those markets to help meet the increased demand and focus on higher value nutritional products.