Dairy giant Fonterra has reported a 3.7% dip in revenue for the six months to January to $7.7 billion.However, the company remains on track to achieve its second-highest cash returns to farmers this year.Chief executive Andrew Ferrier said the company has
Dairy giant Fonterra has reported a 3.7% dip in revenue for the six months to January to $7.7 billion.
However, the company remains on track to achieve its second-highest cash returns to farmers this year.
Chief executive Andrew Ferrier said the company has faced olatility in both international prices and exchange rates during the half year, which contributed to the drop.
However, he said lower average selling prices were largely offset by growth in product volumes sold and positive net foreign exchange impacts – including hedging gains.
Mr Ferrier said demand from customers increased through the half year as consumer confidence continued to improve in key markets around the world.
“This led to an increase in product sales, meaning our inventory levels were also at more normal levels compared with the usual highs of a year earlier, during the worst of the financial crisis.”
The lower inventory value, combined with equity inflows from capital structure initiatives, contributed to a significant improvement in Fonterra’s interim balance sheet position, with debt gearing at 53.3% compared with 61.5% at January 31 last year.
Fonterra chairman Sir Henry van der Heyden said the strong recovery in global dairy prices underpinned the improve milk price performance by the co-operative in the six month period.
In November, that led to the board increasing the forecast milk price to $5.70 per kilogram of milksolids (kgMS) from the season’s opening forecast of $4.10kgMS.
A boost to advertising and promotional spending led to a 5.8% increase to operating expenses. The increased marketing investment was to grow and defend market share in the company's regional consumer brands businesses.
With the increased marketing spend excluded, Fonterra claims its operating expenses were largely flat.
Finance costs of $172 million were lower that the previous comparable period's $368 million. About $60 million of the reduction was due to lower debt levels and the cost of borrowing.
A further $160 million reflected changes in the fair values of interest rate hedges that adversely affected the company during 2008/09.
Sir Henry said the $5.70kgMS forecast and the company's target dividend range of 20-30c per share would mean that the most recent three seasons rank among the top four in terms of total cash returns paid to farmers since the Fonterra's formation in 2001.
The average Fonterra farmer is forecast to receive about $610,000 from their company this year.
