13 Dec 2011

Fonterra increases milk payout

7:10 pm on 13 December 2011

Fonterra has increased its milk payout by 20 cents per kilogram of milk solids to $6.50.

The distributable profit range (dividends paid on shares) stays the same at 40 to 50 cents per share, giving a total forecast payout of $6.90 to $7.

In October this year, Fonterra lowered its milk price forecast by 45 cents, blaming falling world commodity prices and a strong New Zealand dollar.

But chairman Sir Henry van der Heyden says the latest revision recovers part of that reduction and reflects a modest recovery in global dairy prices over the past two months.

Fonterra chief executive Theo Spierings says prices have edged up in three of the last four fortnightly auctions on the global dairy trade online trading platform.

Mr Spierings says world dairy trade growth is being led by demand for milk powders, especially in emerging markets.

While foreign exchange volatility remains, he says the impact on the Fonterra farmgate milk price becomes less further into the season as the proportion of foreign exchange hedging increases.

Dairy product prices are now 6% above their recent low in October.

BNZ economist Doug Steel calculates the increase will add $300 million to the New Zealand economy.

Fonterra paid a record $8.25 per kg of milk solids last season due to record production and sales.