Fonterra has held its forecast farmgate payment on expectations of higher global prices in the second half of the season, and wants to grow its winter milk supply, meaning a tinkering with the capital structure.
Farmers are still expected to be paid $5.50 per kilogram of milk solids, with forecast earnings per share unchanged at between 40 cents and 50 cents, the Auckland-based co-operative says in a statement.
That is based on the dollar holding at current levels for the rest of the season and a stronger currency may impact the forecast, it says.
We had a strong start to the season and milk collection volumes were running 6 percent ahead of last season on a year-to-date basis," chief executive Theo Spierings says. "However, the dry conditions mean we are currently forecasting total milk collection volumes to finish approximately 1 percent ahead of the full season."
Separately, Fonterra said it plans to issue one share or unit in the Shareholders' Fund for every 40 held on April 12 at no cost to match any increase in production next season.
The co-operative intends to introduce a dividend reinvestment plan in October and plans to conduct another supply offer for farmer shareholders to sell their dividend rights into the fund last this year.
The dairy exporter has modified its growth contracts to give more time and options for growing farmers to buy shares which meet their production.
The issue will increase the share base by 2.5 percent, and while diluting dividends per share or unit, won't impact on the total return to farmers and investors, Fonterra says.
"With a stable capital base, we now have certainty and can offer farmers more ways to grow milk supply and given them more time to share up," chairman John Wilson says.
Fonterra Shareholder Fund units are 31 percent above their offer price at $7.27 and shares in the co-operative last traded at $7.20.
The company also announced it will spend more than $100 million on a new UHT processing plant at its Waitoa plant in Waikato as it aims to double UHT production over the next few years.