Fonterra says total farmer payout this year likely to be $6.40/kgMS

Fonterra Cooperative Group has told shareholders at its annual meeting in Darfield today that the indicative payout level to its 10,500 farmer suppliers this season will be $6.40 a kilogram of milk solids.

The cooperative boosted its forecast farmgate milk price for the current season to $6/kgMS last month after rising global dairy prices, adding an estimated $3.8 billion to New Zealand's economy.

It previously stated the additional dividend would be based on an earnings per share forecast of 50-60c. Fonterra's policy is to pay out 65-75% of adjusted net profit after tax over time and today chairman John Wilson indicated this year's dividend would be 40cps once retentions are taken out.

That compares to the $4.30/kg MS paid out in the 2015/2016 season, which included a farmgate milk price of $3.90 and a 40c dividend.

Analysts have been predicting Fonterra would hike its milk price payout even further after gains this week in global dairy auction prices. Analysts are now expecting the final payout to be between $6-6.50/kgMS.

Chairman John Wilson told the meeting that the milk price model put in place in 2009 had added 36c to the farmgate milk price – under the old model, the 2016 farmgate milk price would have been $3.54/kgMS rather than $3.90.

Fonterra also used the annual meeting to announce the launch of a new range of premium Anchor products in China, featuring two UHT products. The Upline range includes LiveUp, a high protein milk with 50% more protein than standard UHT, and NaturalUP, which is made from certified fresh organic New Zealand milk.

Fonterra Greater China president Christina Zhu said the products are in response to changing consumption patterns, with Chinese consumers seeking out more premium and healthy options.

Research from the Boston Consulting Group has shown Chinese consumers are now the world's most health conscious with 73% willing to pay more for items that are healthier.

Units in Fonterra Shareholder Fund are unchanged today at $5.93, up 10% over the past year.

(BusinessDesk)