The farmer-owned cooperative, which is New Zealand's largest exporter, today announced its financial results for the six months to January 31, saying the higher sales volumes helped maintain revenues during a period of recovering dairy ingredient prices globally and the company is on track to deliver the second highest ever cash returns to farmers.
Key points were:-
* Revenue was down 3.7% from $8 billion to $7.7b. Lower average selling prices cut more than $1.6b from Fonterra's revenue but this was partly offset by $1b of additional revenue as a result of higher sales volumes, and positive net foreign exchange impacts of $300 million.
* The forecast milk price for the 2009/10 season remains at $5.70 per kilogram of milksolids (kgMS), as announced in December 2009.
* An interim dividend of 8 cents per share will be paid to shareholders on April 20. The full-year target dividend range remains at 20-30 cents per share.
Chairman Sir Henry van der Heyden said the strong recovery in global dairy prices underpinned the improved milk price performance and Fonterra was currently on track in 2009/10 to achieve the second-highest cash returns to farmers since the company was formed in 2001.
The average Fonterra farmer is forecast to receive about $610,000 this year.
Chief executive Andrew Ferrier said the company faced continued volatility in both international prices and exchange rates during the half year but lower average selling prices were largely offset by growth in volumes sold and positive net foreign exchange impacts, including hedging gains.
Mr Ferrier said consumer confidence continued to improve in key markets around the world, leading to an increase in sales.
That meant inventory levels were at more normal levels compared with the unusual highs of a year earlier, during the worst of the financial crisis.
The value of inventories was $4.2b compared with $5.1b a year earlier.
Mr Ferrier said that while there was still some volatility in global dairy markets, there were recent signs of stability returning -- over the past five months average selling prices for whole milk powder on the globalDairyTrade platform have stayed within a fairly narrow band of around US$3250 to US$3600, or $NZ4418 to $NZ4894.
Fonterra Shareholders' Council chairman Blue Read says it was extremely satisfying to see the company's balance sheet improve and debt gearing strengthened to 53.3%, down from 61.5% at the same time a year earlier.
"The bolstering of the balance sheet includes the positive impact from $263m that was raised from shareholders in January, following the first two stages of a capital restructuring of our cooperative that was approved by shareholders in 2009," he said.
Mr Read said both the council and the Fonterra board agreed they needed to address the company's capital structure and that the business would benefit from having a more stable capital base.
Sir Henry said the board had signalled to farmer shareholders last year that retentions would be used more as a way of strengthening the co-operative's balance sheet.
"During the half year, we've also seen our farmers vote in favour of two important steps to strengthen the Co-operative's capital structure. Discussions are ongoing with the Shareholders' Council on a proposed third step of capital structure change that would involve farmers trading shares among themselves -- rather than through the co-operative -- to address redemption risk and stop money washing in and out of our Co-op's balance sheet."
