Dairying payout cut 'return to normality'
Lower commodity prices and a strong New Zealand dollar are being blamed by Fonterra for a 19 per cent drop in its 2012 payout to its farmer shareholders.
The co-operative reported its annual result yesterday and announced a payout of $6.40 per kilogram of milk solids.
The result included a lower farmgate milk price of $6.08/kg milk solids, down from $7.60/kg last year, and a dividend of 32 cents a share, with retentions of 10 cents a share.
The payout was no surprise to Federated Farmers South Canterbury chairman Ryan O'Sullivan.
It was historically high on long term payout averages and was higher than what Fonterra farmers would get this year and higher than what they would have budgeted for, he said. "The banks don't even use $6.40 and it's still above where most people would budget for bank purposes.
"Everyone is saying that the sky is falling down because it's 19 per cent down on last year, but last year was not a benchmark - that was a one-off year driven by high commodity prices and $6.40 is still a good payout in anyone's language."
That, combined with production being about 10 per cent higher across the board, had topped off a good year for dairy farmers, he said.
However, Fonterra chairman Sir Henry van der Heyden said many farmers would be feeling the pain as a result of the drop and the $5.25/kg milk solids forecast for the 2012-2013 season.
"The drop in payout is driven by the drop in milk price and there are two fundamental reasons why milk prices come down - currency and commodity prices."
He said the payout was "manageable", but it was the season that had just started where the pain would be felt.
Fonterra reported flat revenues of $19.7 billion for 2012 with net profit after tax down 19.1 per cent on last year to $624.7 million.
Fonterra also posted an 11 per cent increase in export volumes to 2.32 million tonnes. Sales volumes increased just 2 per cent to nearly 4 million tonnes.
Cashflows were up $206m at $1.4b.
Sir Henry said there would be no updated forecast for the 2012-2013 season because Fonterra was in a blackout until its Trading Among Farmers prospectus was issued in October.
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