Fonterra Revises 2012 Payout Forecast Due to “Uncertain” Global Markets

Fonterra Chief Executive Theo Spierings said "global markets seem to be reacting to the ongoing economic difficulties in Greece, the potential for conflict in the Middle East and China's reduced growth forecasts." Fonterra announced a revised payout forecast for the 2011/12 season of NZ$6.75 -NZ$6.85, for a fully shared up farmer, 15 cents down on the previous forecast.

Mar 12 2012 --- New Zealand’s Fonterra Co-Operative Group Ltd., today forecast a lower payout to farmers for the season ending May 31. The company said global uncertainty and concerns over China's economic outlook mean dairy prices are likely to remain under pressure until at least mid-2012.

Fonterra announced a revised payout forecast for the 2011/12 season of NZ$6.75 -NZ$6.85, for a fully shared up farmer, 15 cents down on the previous forecast.

Fonterra Chief Executive Theo Spierings said "global markets seem to be reacting to the ongoing economic difficulties in Greece, the potential for conflict in the Middle East and China's reduced growth forecasts."

The revised forecast comprises a lower Fonterra Farmgate Milk Price of NZ$6.35 per kg milksolids, down from NZ$6.50. The season's Distributable Profit range forecast of NZ$570 - 720 million, equating to 40-50 cents per share remains unchanged.

Fonterra is required to consider its Farmgate Milk Price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA).

Fonterra Chairman Sir Henry van der Heyden said the lower Farmgate Milk Price forecast reflected declining commodity prices and a stronger New Zealand dollar.

"We've had price declines in the five out of the last six Global Dairy Trade (GDT) trading events," said Sir Henry.

Overall, the GDT-Trade Weighted Index is down 5.7 per cent since December 13 2011 when the forecast of NZ$6.50 per kgMS was announced.

Sir Henry said the New Zealand dollar's continuing strength, higher levels of global milk production, and uncertainties in international markets led to the Board decision to lower the Fonterra Farmgate Milk Price forecast.

Chief Executive Theo Spierings said the trends were indicating for stronger global production continuing into 2012.

“While we have had a strong start to the season in New Zealand, with record milk flows, we are also seeing higher milk production levels in the US and Europe.

"International milk powder demand, however, currently appears robust which should help offset the impact of the stronger milk supply growth.”

"We think dairy commodity prices are likely to remain under some pressure through to mid-2012," said Mr Spierings.

Fonterra will announce its interim results and dividend on March 29 2012.