Fonterra cheese loss

TIM HUNTER
Last updated 16:43 11/11/2013

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Dairy giant Fonterra is writing off $157 million from the value of its stock as it sells cheese and casein at a loss because of high milk prices.

In a disclosure to the stock exchange this afternoon Fonterra said prices for its milk powders had risen much more than prices for cheese and casein.

The result was a margin squeeze "due to the input costs rising disproportionately to the sales price and in some product streams the selling price being lower than input costs."

The high milk price meant additional provisioning had been taken in the first quarter of this financial year of $157m, Fonterra said.

Some analysts have seen this as a downgrade of expected profit for the 2014 financial year.

"This is no provision for inventory," said one.

"It is the result of Fonterra paying so much for milk that every block of cheese etc has to be sold at a loss. It is a trading loss pure and simple."

Units in the Fonterra Shareholders Fund eased 16 cents to $6.66 on market today. The co-op's shares on the farmers' market fell 15c to $6.67.

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