January 27, 2005

 

 

NZ Fonterra's dairy sales up on strong international demand

 

Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, said first-half sales rose 2 percent as the stronger New Zealand dollar eroded revenue from record milk powder, butter and cheese prices. This as international demand for its dairy products increased.

 

Continued high prices also offset the negative effects of a strong New Zealand dollar, the dairy cooperative said in a statement.

 

Sales rose to NZ$5.75 billion (US$4.1 billion) in the six months ended Nov. 30, from NZ$5.64 billion a year earlier, the Auckland- based company revealed.

 

Fonterra, a cooperative owned by the 12,000 farmers who supply its milk, is New Zealand's biggest exporter and accounts for about 7 percent of the nation's gross domestic product. The company will pay farmer-shareholders NZ$2.4 billion from first-half income, up from NZ$2.25 billion a year earlier.

 

Net income after payments to farmers fell to NZ$15 million from NZ$16 million a year earlier.

 

The farmer-owned group is New Zealand's largest company and biggest exporter.

 

Chairman Henry van der Heyden said that while poor weather had negatively affected milk flows across the country, historically high commodity prices had helped fuel the revenue rise.

 

"Commodity prices reaching historically high levels helped offset a stronger New Zealand dollar and lower production volumes in New Zealand,'' he said.

 

Van der Heyden refused any comment on Fonterra's takeover bid for Australian dairy target National Foods Ltd., as the group decides whether to increase or abandon its hostile bid.

 

Fonterra accounts for about 40 percent of the world trade in dairy products. It sells yogurts, cheeses, spreads and food supplements in 140 countries under the Anchor, Fernleaf, Anlene and Soprole brands.

 

About three quarters of those sales are priced in U.S. dollars. The New Zealand dollar has risen about 7 percent against the U.S. dollar in the past year. The New Zealand dollar traded at a 16-year high of 72.68 U.S. cents last month, and was at 71.42 cents at 9:24 a.m. in Auckland.

 

Fonterra's policy of buying foreign exchange contracts to cover all its U.S. dollar sales 15 months in advance benefited the company in the period, Chief Executive Andrew Ferrier said, without quantifying the gain.

 

To make up the shortfall in local milk output, Fonterra said it is meeting customer contracts by supplying products sourced from the United States, South America, Australia and Europe.