Fonterra milk truck Photo: RNZ / Rebekah Parsons-King
- Fonterra Q1 profit falls 30 percent to $263m
- Lower sales, high milk prices dent earnings
- High global prices on improved demand result in increased farm payout forecast
Dairy giant Fonterra has raised its forecast milk price payout despite posting weaker profits for the first three months of its year.
The co-operative has raised its forecast price range by 50 cents to $9.50 to $10.50 a kilo of milk solids, with a $10 midpoint.
Chief executive Miles Hurrell said the forecast increase was down to improved market conditions.
"We're seeing a recovery of demand in Greater China as domestic milk production rebalances and demand from Southeast Asia continues to be strong."
"Looking at supply, milk production out of the US and Europe continues to be impacted by local factors, while production out of most regions of New Zealand has increased. "
Hurrell said it was watching for any impact of increased geopolitical uncertainty on dairy markets.
Profit falls
However, the higher price of milk was a factor in Fonterra reporting a 30 percent fall in its first quarter profit to $263m from $346m the year before.
"This is a strong start to the year, especially when taking into consideration the higher cost of milk and narrower price relativities when compared to this time last year," Hurrell said.
He said Fonterra had started the year with less product in stock which affected sales, but it had switched more milk into higher value products.
The co-operative was still forecasting a full year dividend between 40 and 60 cents a share.
Hurrell said Fonterra was making progress on its business strategic change which is based on concentrating on high value ingredients and nutritional products, and divesting its consumer goods business, including major brands Anchor and Mainland, and operations in Australia and Sri Lanka.
"Last month, we confirmed we are pursuing a divestment for these businesses. This work is now underway and we will share more information as it progresses."
"Our priority is maintaining momentum in our financial performance while the divestment process is underway," Hurrell said.
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