Investors hold breath for Fonterra half-year result
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The eyes of sharemarket investors, farmers and economists at home and overseas will be on Fonterra tomorrow as New Zealand's biggest company delivers its first financial result in a new market environment and the worst drought in decades.
The presentation of the dairy giant's financial results for the half year till January 31 will also mark a first for new chairman John Wilson of Te Awamutu, who took the reins from long-time chairman Sir Henry van der Heyden at the end of last year.
It will be the first time Fonterra financial results are closely scrutinised by sharemarket analysts, but Harbour Asset Management portfolio manager Andrew Bascand said this first should not be overstated as the big co-operative had been "really good" about updating the market and analysts since the IPO of units in its farmer-owned shares in November.
Bascand said Fonterra had also talked to the market for 18 months before listing its units on the NZX and ASX last year. The likely hit to Fonterra's milk collection from drought in some of its top production areas such as the Waikato was expected to affect the potential for small dividend upgrades in the IPO prospectus, he said.
"It makes it difficult for the company to talk as positively."
However, the market was expecting a "very solid" statement and reaffirmation of the prospectus in other respects.
The prospectus guidance for the 2013 financial year was for profit of $690 million, earnings before interest and tax of $1.054 billion, and revenue of $18.6 billion. World dairy prices have surged in recent weeks in anticipation of a world supply shortage because of New Zealand's drought.
Analysts said they were also keen to hear Fonterra leaders' expectations for the rest of the financial year given the ongoing drought.
Bascand hoped the company would use the opportunity to outline growth prospects in new global markets, particularly China and Asia.
Grant Williamson, of Hamilton Hindin Greene, said he would be looking for forward comments from the company around the unit price and the effect of drought on production, particularly in the second half of the year.
Fonterra's farmer shareholders will be looking for a "very good performance" given that some of its independent but smaller competitors were signalling strong payouts, said Federated Farmers Waikato president James Houghton.
This time last year Fonterra posted an 18 per cent increase in half-year net profit after tax of $346m.
Revenue for the half year to January 31 was $10 billion, and gearing ratio 47 per cent. Fairfax NZ
Do you agree with claims that Fonterra is transferring wealth from farmers to unit holders and to the dividend in contradiction of its milk price manual?Related story: Lower milk price 'to boost dividend'