7 Dec 2009

Federated Farmers urge higher profit retention

3:31 pm on 7 December 2009

Federated Farmers thinks Fonterra should retain more of its profits to help grow the business.

The dairy co-operative has introduced a new dividend and profit retention policy as part of its capital restructuring measures.

It's set a target of keeping back 25% to 35% of the profit it has avaliable for distribution each year.

For the current season, the company is forecasting a distributable profit of 35 o 45 cents per share, which means it expects to pay a dividend of 20 to 30 cents per share, on top of the basic milk payment.

But Federated Farmers thinks it should hold on to most of that profit.

Dairy chair Lachlan McKenzie points out that profit retention was normal practice for the Dairy Board and the companies, before Fonterra was formed.

Dry shares now available

Farmers wanting to buy extra shares in Fonterra are able to apply from 7 December.

As part of its capital restrucuring the co-operative is allowing them to buy up to 20% more shares than what they need to match their milk supply.

More than 260 million "dry" shares are available, but the company does not expect all of them to be sold.

Farmers have until 21 January to apply for the shares, at the current fair value price of $4.52 each.