Fonterra forecast payout unchanged
Dairy giant Fonterra has unveiled a five-point plan it says will give its farmer-shareholders more flexibility in managing their farm businesses.
The objective is to support and grow milk production to support the co-operative's growth strategy, Fonterra said in a statement.
The plan's five points include a bonus issue of one additional Fonterra share or unit for every 40 held on April 12, 2013. The bonus issue would automatically provide all shareholders and unit holders with free additional shares and units on April 24.
"Based on current production levels, the bonus issue means around 95 per cent of farmer shareholders will not need to buy additional shares next season to match any increase in production," Wilson said.
Also in the five-point plan, there would be a further supply offer enabling Fonterra shareholders to sell the economic rights of some of their shares into the Fonterra Shareholders' Fund; and a dividend reinvestment plan enabling shareholders and unit holders to elect to receive dividends in the form of shares or units.
In other aspects of the plan, there would be flexible contracts to give new and growing farmers more time and options to fully back their milk production with Fonterra shares; and new opportunities for winter milk supply contracts in the upper North Island to fuel Fonterra's new long-life (ultra-heat treated) milk processing plant to be built at Waitoa in the Waikato.
Fonterra chairman John Wilson said Fonterra was committed to providing flexibility for its farmers to help them manage their shareholdings.
"Milk is the life blood of the co-operative," he said.
"For Fonterra to grow, we need our farmers to grow. With a stable capital base [from Trading Among Farmers], we now have certainty and can offer farmers more ways to grow milk supply and give them more time to share-up."
Chief executive Theo Spierings said the initiatives would benefit existing farmer-shareholders, make life easier for those expanding production, and encourage new entrants to join the co-operative.
"Unit holders who have chosen to invest in Fonterra's continuing performance will also benefit - not only through the bonus issue but also the effort we are making to keep driving forward on our business strategy."
Spierings said the initiatives announced today were planned before the launch of the Fonterra Shareholders' Market and Fonterra Shareholders' Fund, and were referred to in the offer documents.
"Now is the right time to implement them," he said.
In a separate announcement today, Fonterra confirmed its forecast farm gate milk price for the current season of $5.50 per kilogram of milksolids, unchanged from the previous forecast.
The payout forecast range for the 2012-2013 season is confirmed at $5.90-$6 before retentions for a fully shared-up farmer, with the forecast earnings per share range remaining at 40 cents to 50c.
Spierings said dry weather, particularly in the North Island, in mid-December and January, had caused a slowdown in milk supply growth. Fonterra was forecasting total milk collection volumes for the full season to finish about 1 per cent ahead of last season.
Global dairy prices had remained relatively flat through December and January, with the Global Dairy Trade trade-weighted index increasing by 2 per cent over this period. The index had since gained 5 per cent in February.
"Given current global conditions, our farm gate milk price forecast anticipates global dairy prices are likely to move higher in the second half of the season," Spierings said.
The farmgate milk price forecast of $5.50 kgms was based on no substantial change to the exchange rate for the rest of the season.
If there was a further significant strengthening of the New Zealand dollar against the US dollar, this might adversely impact on the forecast farm gate milk price, Spierings said.
Fonterra is New Zealand's biggest company and the world's largest dairy exporter.