Dairy Giant Fonterra Cuts Dividend Forecast
Fonterra Cooperative Group, the world’s biggest dairy exporter, unexpectedly cut its full-year dividend forecast as first-half earnings fell.
The company’s 10,000 New Zealand dairy farmers will receive a dividend of 20-30 NZ cents, down from a previous forecast of 25-35 cents, Auckland-based Fonterra said recently. First-half net income fell 16 per cent to NZ$183 million ($140 million) as revenue declined 14 per cent to NZ$9.7 billion.
Fonterra chief executive officer Theo Spierings said that the company aimed to increase its dividend to help compensate for a plunge in milk prices. Fonterra maintained its 2014-15 milk payout forecast at NZ$4.70 per kilogram of milk solids, almost half last year’s record NZ$8.40.
The lower dividend “will be a surprise to our farmers,” said chairman John Wilson. “It’s a very tough trading environment out there. We’ve got an oversupply of milk globally, but also some major geopolitical factors, which have had an impact.”
The decline in earnings was driven by a loss on sales from inventories in the first quarter, falling margins in the Australian ingredients business, and a write-down in the value of the cow herd in China, Fonterra said. A weaker New Zealand dollar is helping to support the milk payout forecast, it said.
Bloomberg News, edited by ESM