Fonterra has dropped its forecast payout to farmers and says it is unlikely to pay a final dividend because of pressure on its earnings' margins.
fonterra Photo: RNZ
The co-operative has lowered the farmgate milk price paid to farmers by five cents to $6.70 a kilo of milk solids.
It also warned that its forecast earnings will probably be around 25 cents a share, the bottom of the range it gave in May, and that it will not pay any further dividend this year.
Fonterra chairman John Monaghan said the high price of milk has put pressure on its earnings and profit margins, but that a cut in the milk price was the right thing to do and it was still a strong payout.
"During the process of closing our books for the financial year end, the need for these actions has become clear," he said.
"Our forecast performance is not where we expected it would be. While the numbers are not finalised, our margins were less than we forecasted right across our global ingredients and consumer and foodservice businesses."
Mr Monaghan said he wanted to be upfront with farmers and unitholders.
A halt in trading the co-operative's shares and financial units was lifted.
Fonterra made a loss of $348 million in the first half of the year, because of a compensation payout to French food company Danone and a write down of its investment in Chinese dairy company Beingmate.
The announcement is less serious than some commentators had been expecting, and may reflect sensitivity to recent criticism about not disclosing illness of the former chairman, John Wilson, as well as it financial performance.
The co-operative's full year results will be announced on 13 September 2018.
