Fonterra has said that the strong New Zealand dollar has offset the gains achieved in the first half of the financial year. Despite commodity prices remaining high and increased sales volume generating NZ$6bn (US$4.442bn) in operating revenue, up from NZ$5.7bn the year before, the available payout to suppliers has dropped by NZ$200m to NZ$2.2bn.

As a cooperative, Fonterra prepares its accounts on the basis that all of the net surplus earned will be paid out to suppliers. In a statement issued yesterday (27 February) Fonterra chairman, Henry van der Heyden did not specify whether the shortfall would affect payout over the full 2005/06 season.

“As we indicated in December when we affirmed the payout forecast, we do not see any upside in commodity prices. Management is working hard to reduce costs and improve productivity throughout the business.

“We’re realising some of the benefits of the business reorganisation that’s been taking place over the past year, as well as bringing forward as many programmes as we can to capture their gains in the current year.”

According the results, Fonterra Ingredients achieved a 4.8% rise in sales volume compared to this time last year. The improvement was due to a combination of better local production and increased sales of product sourced from third parties internationally, the company said.

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Van der Heyden said total milk solid production at 566 million kilos was 3.7% above production for the same season last year.

Fonterra has faced higher costs during the half due to higher average prices paid for third party purchases and increased transportation and manufacturing costs. The total cost of goods including payout to suppliers increased by NZ$243m to NZ$4.9bn.