The Fonterra Shareholders' Fund unit price dropped by 21c yesterday after the co-operative signalled that its earnings would fall slightly short of prospectus forecasts in the current year.
By mid-morning, the units were trading at $7.20, down 28c from Wednesday's close, before eventually closing at $7.27.
Fonterra units give non-farming investors exposure to the dividend-paying, or manufacturing side, of Fonterra but not to high milk prices, which benefit farmers only.
The co-operative said the combined impact of the drought and the "reshaping" of its Australian business meant its forecast for normalised earnings before interest and tax was likely to be around $1 billion, just below the prospectus forecast of $1.08 billion.
Fonterra confirmed that the 2013 forecast cash payout to farmer shareholders of $6.12 would remain unchanged.
The current earnings per share guidance range of 45-50c per share had been reconfirmed, although it was now likely to be at the lower end of the range, it said.
The prospective annual dividend per share of 32c remained the same.
Chief executive Theo Spierings said volatility caused by the drought and changes to Fonterra's Australian business had affected earnings before interest and tax.
In the first half of 2013 Fonterra's NZ Milk Products (NZMP) division delivered a strong performance on the back of price premiums, product mix, cost savings and productivity gains.
Fonterra said at the time of its interim result in March that the second half was likely to be more challenging.
"The drought has contributed to a 64 per cent rise in whole milk powder prices on GlobalDairyTrade since early 2013, and this has had a temporary, but significant, negative impact on NZMP's margins," Spierings said.
"At the same time, our Australian business remains under pressure.
"Although a recovery plan is being implemented, it is in its early stages and will not counteract the impact on earnings of intense competition and the accelerated reshaping of our business."
Changes to the Australian business resulted in a number of additional write-offs.
He said the revised earnings forecast was subject to continued volatility in dairy prices, foreign exchange and other market uncertainties that might occur in the final month of the year.