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March 12, 2012


Fonterra revises 2012 payout forecast

Press Release


Fonterra announced Monday (Mar 12) a revised payout forecast for the 2011/12 season of US$6.75-6.85, for a fully shared up farmer, 15 cents down on the previous forecast.


The revised forecast comprises a lower Fonterra farmgate milk price of US$6.35 per kg milk solids, down from US$6.50. The season's distributable profit range forecast of NZD570–720 million (US$475-599 million), equating to 40-50 cents per share remains unchanged.


Fonterra is required to consider its farmgate milk price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA).


Fonterra Chairman Sir Henry van der Heyden said the lower farmgate milk price forecast reflected declining commodity prices and a stronger New Zealand dollar.


"We've had price declines in the five out of the last six Global Dairy Trade (GDT) trading events," said Sir Henry. 


Overall, the GDT-Trade Weighted Index is down 5.7% since December 13, 2011.


Sir Henry said the New Zealand dollar's continuing strength, higher levels of global milk production, and uncertainties in international markets led to the Board decision to lower the Fonterra farmgate milk price forecast.


Chief Executive Theo Spierings said the trends were indicating for stronger global production continuing into 2012. 


"While we have had a strong start to the season in New Zealand, with record milk flows, we are also seeing higher milk production levels in the US and Europe.


"International milk powder demand, however, currently appears robust which should help offset the impact of the stronger milk supply growth.


"In the past few weeks, global markets seem to be reacting to the ongoing economic difficulties in Greece, the potential for conflict in the Middle East and China's reduced growth forecast. These events appear to be having a negative influence on most commodity prices.


"We think dairy commodity prices are likely to remain under some pressure through to mid-2012," said Mr Spierings.


Fonterra will announce its interim results and dividend on March 29 2012.

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