New Zealand dairy giant cuts target price Fonterra milk, and profitability will be reduced

  • New Zealand dairy giant cuts target price Fonterra milk, and profitability will be reduced
    FarmIreland.t. E.
    New Zealand’s Fonterra cooperative group Ltd, the world’s largest dairy exporter, on Friday lowered the profit forecast and slightly lowered its forecast for the price of milk.
    https://www.independent.ie/business/farming/dairy/milk-prices/nz-dairy-giant-fonterra-cuts-milk-price-target-as-profit-margins-shrink-37202731.html
    https://www.independent.ie/business/farming/article37079282.ece/b73eb/AUTOCROP/h342/Fonterra%20logo.jpg

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New Zealand’s Fonterra cooperative group Ltd, the world’s largest dairy exporter, on Friday lowered the profit forecast and slightly lowered its forecast for the price of milk.

Cooperative nature 2017/18 producer price at NZ $ 6.70 per kilogram of dry milk solids (kgMS), from NZ$6.75 per kgMS.

It will also undertake a full year dividend of 10 cents per share already paid in April, compared with 40 cents in the previous year.

“Our forecast performance is not where we expected,” said Chairman John Monaghan.

“While the numbers are not completed, our margins were less than we anticipated just opposite our global products and consumer and restaurant business”.

Fonterra said the higher milk prices put pressure on profits from value-added branded products, such as yogurt and cheese, and said that its full-year adjusted earnings will be at or slightly below the previously announced forecast range of 25 to 30 cents a share.

The firm stated that it wanted to maintain a strong balance sheet, rather than pay more now farmers, so it was well situated for any future difficult seasons.

Lower dividends and milk prices meant that farmers could defer making a big investment, said Nathan penny, rural economist, ASB Bank.

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“The season so far was good for them, but this has taken the cherry on top,” said penny, pointing to the relatively high purchase price.

However, it is estimated that 13,000 farmers Fonterra will lose on the average approximately NZ$15,000 to NZ$23,000 ($15,200 9,900 to$) additional income expected.

That, combined with the possibility of revising the price of milk next year from the current NZ $ 7.00, may continue to put pressure on the already low level of business confidence, he said.

The result adds to the growing headwind for New Zealand economy, just a day after the Central Bank unexpectedly determined to keep interest rates at a record low until 2020, and expressed concern about the constantly disappointing growth.

In March, the company fonterra has published half a year loss, with a large write-off on its stake in Chinese baby food manufacturer, Beingmate.

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