NZ: Fonterra lowers FY earnings forecast
Fonterra said 2013 EBIT will likely be lower than its previous forecast
New Zealand dairy giant Fonterra has lowered its full-year earnings forecast due in part to the impact of the country's drought on international dairy prices.
Fonterra said EBIT for the 2013 financial year ending 31 July will likely be lower than the forecast outlined in the prospectus for the Fonterra Shareholders Fund, which was launched last year.
The co-operative said the combined impact of the drought and the reshaping of its Australian business meant its forecast for normalised EBIT was now likely to be around NZ$1bn - just below the prospectus forecast of $1.08bn.
The revised figure is subject to continued volatility in dairy prices, foreign exchange and other market uncertainties that might occur in the final month of the fiscal year, it said.
Fonterra confirmed the 2013 forecast cash payout to farmer shareholders of $6.12 would remain unchanged and it reaffirmed its EPS guidance range of 45-50 cents per share, but said this was now likely to be at the lower end of the range.
Fonterra CEO Theo Spierings said "unprecedented volatility" caused by the "extreme drought" in New Zealand earlier this year, and the "acceleration of the reshaping of Fonterra's Australian business", had affected earnings.
"Our Australian business remains under pressure. Although a recovery plan is being implemented, it is in its early stages and will not counteract the impact on earnings of intense competition and the accelerated reshaping of our business," Spierings said.
FONTERRA UPDATES FY13 FORECAST 25 JULY 20132 MIN READSHARE THIS PAGE: ShareShareShareShare Fonterra Co-operative Group Limited today announced that its EBIT for the FY13 financial year ending 31 July 2013 will be lower than the forecast reported EBIT in the Fonterra Shareholders’ Fund Prospectus, issued last year. The Co-operative confirmed that the FY13 Forecast Cash Payout to Farmer Shareholders of $6.12 remains unchanged. In addition, the current earnings per share1 guidance range of 45 – 50 cents per share has been reconfirmed; although it is now likely to be at the lower end of this range. The prospective FY13 annual dividend per share of 32 cents remains the same.
Fonterra Chief Executive Theo Spierings said that although the financial year had not yet ended, the impact on EBIT of unprecedented volatility caused by the extreme drought in New Zealand earlier this year, and the acceleration of the reshaping of Fonterra’s Australian business, was sufficiently clear for the Co-operative to provide an update today.
“In the first half of FY13 NZ Milk Products’ (NZMP) delivered a strong performance on the back of price premiums, product mix, cost savings and productivity gains. At the time of our interim result on 27 March 2013, we cautioned that the second half was likely to be more challenging.
“The drought has contributed to a 64 per cent rise in Whole Milk Powder prices on GlobalDairyTrade since early 2013, and this has had a temporary, but significant, negative impact on NZMP’s margins.
“At the same time, our Australian business remains under pressure. Although a recovery plan is being implemented, it is in its early stages and will not counteract the impact on earnings of intense competition and the accelerated reshaping of our business. The reshape programme has resulted in a number of additional write-offs,” said Mr Spierings.
“The combined impact of the drought and the reshaping programme in Australia means Fonterra’s forecast normalised EBIT2 for FY13 is likely to be around $1 billion, which is below the prospective normalised EBIT of $1.079 billion stated in the Fonterra Shareholders’ Fund Prospectus. This revised figure is subject to continued volatility in dairy prices, foreign exchange and other market uncertainties that might occur in the final month of FY13.
“While the revised normalised EBIT guidance is below the Prospectus forecast, lower interest and tax mean that our earnings per share forecast range of 45 – 50 cents per share remains unchanged,” said Mr Spierings.
Fonterra will provide a full update of its FY13 result on 25 September 2013.
A statement on Fonterra’s FY14 Forecast Cash Payout expectations (Farmgate Milk Price and dividend per share) will be made following its scheduled Board meeting next week.
Original source: Fonterra
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