Fonterra has issued a forecast for “solid” earnings per share for the dairy giant’s 2017 financial year, although the company conceded its estimate for the farmgate milk price it will pay farmers means suppliers face a “challenging season”.
The New Zealand-based group is estimating its earnings per share will be NZD0.50-0.60 (US$0.36-0.43) The forecast farmgate milk price has been maintained at $4.25 per kilogram of milksolids, making the total payout available to farmers in the 2016/17 season NZD4.75 to NZD4.85.
John Wilson, Fonterra’s chairman, said the farmgate price reflects “continuing global uncertainty” and the high New Zealand dollar / US dollar exchange rate, which continues to impact the competitiveness of New Zealand dairy exports.
“The recent weakening of the euro, combined with the continued strength of the New Zealand dollar, has meant a price advantage for European export dairy products,” Wilson said. “We expect global milk supply and demand to come into balance over the course of this season. Farmers globally are producing less milk in response to lower prices and we are forecasting a three per cent reduction in our New Zealand milk collection for this season.”
Chief executive Theo Spierings added the returns from Fonterra’s ingredients, consumer and foodservice businesses continue to grow in-line with the company’s business strategy to convert more milk into higher returning products.
“We are seeing the benefits of our investments in manufacturing over recent years. We now have more flexibility to make the right products at the least cost, delivering better returns for our farmers’ milk,” he said.