New Zealand dairy giant Fonterra Cooperative has said it has increased its forecast payout for the 05/06 season to NZ$4 (US$2.8) per kilogram of milksolids, and said the 15 cent improvement is primarily due to cost and productivity gains, not higher commodity prices.

“Shareholders will welcome the increase, and while some minor gains in forecast product mix and exchange rates have contributed, they need to be aware that our improved forecast is largely the result of an ongoing programme of cost controls and efficiencies being undertaken throughout the season,” said chairman Henry van der Heyden.

“We are already starting to realise some of the benefits of the business restructuring that has been carried out over the past year. The management team has continually been driving to reduce costs and improve productivity right across the business, and since we first signalled the prospect of a lower payout this year there has been a real push to bring forward some of the programmes to capture the gains this year.”

Van der Heyden said market prices were currently stable and Fonterra expects this situation to continue for the full 2005/06 year.