January 26, 2007

Fonterra dairy reports 9 percent rise in profit
 

Fonterra Cooperative Group, the world's biggest dairy exporter, said its first-half sales rose 9 percent aided by an increase in New Zealand milk production.

Sales rose to NZ$6.55 billion (US$4.6 billion) in the six months ended Nov 30 with ingredients volumes up 20 percent at 1.15 million tonnes, the Auckland company said in a statement.

Fonterra accounts for about 40 percent of the international trade in dairy products in 140 countries under the Anchor, Fernleaf and Anlene brands. Recent gains in world prices will help replace earnings lost to the rising New Zealand dollar, the company said.

The company's CEO Andrew Ferrier said there seemed no respite from the tight supply and demand situation in the market structure in the near future.

World dairy prices have gained 27 percent in the past three months and are 17 percent higher than the previous record set in Aug 2005, based on a Commonwealth Bank of Australia index of US dollar prices.

As a cooperative, Fonterra pays out most of its profit to the 11,300 New Zealand farmers who supply it milk. It will have NZ$2.05 billion (US$1.429 billion) available to pay out from this half, down 6.3 percent from a year earlier, because of the rising New Zealand dollar and lower prices in the early part of the period.

Still, the company reiterated in its Dec 15 forecast that it would  probably pay its farmers NZ$4.05 per kilogramme of milk solids for the year ending May 31, from NZ$4.10 a year earlier. Production in the half-year was 578 million kilogrammes, up 2.1 percent from a year earlier.

Ferrier said it was too early to forecast full-year output. Herd numbers were up and the company was encouraging farmers to boost output to benefit from high prices. Still, the weather through May would be the major determinant, he said.

The New Zealand dollar has gained 12 percent the past six months making it the best performing major currency in that time.