Fonterra updates 2017/18 Farmgate Milk Price and earnings

10 August 2018
Fonterra updates 2017/18 Farmgate Milk Price and earnings guidance
Fonterra Co-operative Group Limited today announced a revision to its forecast 2017/18
Farmgate Milk Price, and updated its normalised earnings per share and dividend guidance.
The Co-operative is reducing last season’s 2017/18 forecast Farmgate Milk Price to $6.70 per
kgMS from $6.75 per kgMS. The previously announced 25-30 cents guidance range has been
held but the Co-operative is indicating that it will be at or slightly below this range and it is likely
that the full year dividend will be just the 10 cents already paid in April.
Chairman John Monaghan said the Board has made these decisions in the best long-term
interests of its farmer shareholders and unitholders.
It is important for our Co-operative to have a strong balance sheet and, as we indicated in May,
the higher milk price, which is good for our farmers, has put pressure on Fonterra’s earnings, and
therefore our balance sheet in a year which was already challenging due to the payment to
Danone and the impairment of the Co-operative’s Beingmate investment.
“You never want to have to reduce the Milk Price at the season’s end, but it is the right thing to do
and $6.70 remains a strong milk price.
“Maintaining a strong balance sheet has helped us to support farmers during tough seasons
through our Co-operative Support Loan and being able to bring forward the Advance Rate
Schedule and get money to farmers earlier in the season.
“We need to do everything within our control to keep these options on the table for when farmers
need them. This means keeping our balance sheet strong.
Mr Monaghan said he wanted to be upfront with farmers and unitholders that to achieve this the
Board has taken the step to depart from the amount calculated under the Farmgate Milk Price
Manual. This is permitted within Fonterra’s Constitution.
“During the process of closing our books for the financial year end, the need for these actions has
become clear. Our forecast performance is not where we expected it would be. While the
numbers are not finalised, our margins were less than we forecasted right across our global
Ingredients and Consumer and Foodservice businesses.”
The Co-operative’s full year results will be announced on 13 September 2018.
ENDS

For further information contact:
Fonterra Communications
24-hour media line
Phone: +64 21 507 072