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Fonterra Co-operative Group Ltd has firmed up projections for a bonanza payout for the current dairy season of $7/kg-$7.10/kg -- representing a $9 billion boost to the economy -- with an unchanged forecast milk price of $6.60/kg.
It lifted the forecast distributable profit range from 30c-50c/share to 40c-50c/share, and confirmed it is targeting a dividend range for 2010-201 of 25c-35c/share.
Fonterra chief executive Andrew Ferrier said today there were signs that international dairy supply and demand were moving more in balance at prevailing prices, although there was still considerable volatility in international markets.
He made the comment as the company confirmed the final payout for the past season, 2009-2010, will be its second-highest, at $6.70/kg milksolids, on the back of a 12 percent lift in after-tax profit. For 10,500 farmers, this would mean an average gross payout of $820,000.
The 2009-2010 payout is a 19 percent lift on the 2009 season's $5.21/kg and the milkprice component of $6.10/kg is 29 percent ahead of the previous year's $4.72/kg.
But where the cooperative retained just 1c of the 2009 earnings -- farmers received $5.20/kg -- in 2010 it will retain 33c/share. The company has a new policy of retaining 25 percent to 35 percent of distributable profit, which farmers have said has the potential to raise $1.3 billion in new capital.
Fonterra chairman Sir Henry van der Heyden said the board had retained all earnings from non-recurring items, in addition to its increased retentions to fund investment.
Fonterra had come through the recession well, he said.
"Although business conditions remained volatile, customer demand returned and international dairy prices rose sharply," said Sir Henry.
"Despite drought conditions in the North Island, Fonterra collected a record 1286 million kg milksolids and set a new export record of 2.1 million tonnes of New Zealand dairy products."
Though the farmer payout for the year to July 31, 2010 was up 19 percent, Fonterra announced a 12 percent lift in after-tax profit of $685m for the year, which included $174m of non-recurring gains, mainly from sales of non-strategic assets.
The 2010 distributable profit of 60c/share was above the 40c-50c/share range previously forecast, and the company said today its balance sheet is in the strongest shape in the cooperative's history.
The higher level of retentions, plus farmer investment of $459m in additional shares boosted equity by $862m and reduced the debt to debt-plus-equity gearing ratio to 44.9 percent, down from 53 percent a year earlier.
At July 31, Fonterra's economic net interest-bearing debt was $4.5 billion, $727m lower than a year earlier. Reduced borrowing requirements, combined with lower floating interest rates, cut net finance costs by $135m.