NZ Dairy Group boosts final payout by 5c a kg

By PHILIPPA STEVENSON agricultural editor

New Zealand Dairy Group has significantly raised its final payout to farmers by 5c a kilogram of milksolids, or more than $28 million, above its forecast of just two months ago.

Yesterday, the company said the payment to its 7800 suppliers for the 1999-2000 season would be $3.75 a kg of milksolids, amounting to a total distribution of $2.14 billion.

In late May, the company lifted its forecast for the year to around $3.70 a kg but farmer expectations of a higher return were raised after fierce rival Kiwi Dairies reported an end-of-season payment of $3.82 a kg to its 5700 suppliers.

Chief executive Graeme Milne gave an assurance that it was "an honest result."

"Obviously we push the company as hard as possible but this is not a made-up payout. This is the earnings of the company as being paid to shareholders, and a proper result for the year."

The May forecast came before the company knew the Dairy Board payout of $3.35 a kg, and its level of retentions.

It also preceded "some wash-up issues" involving payment systems between the companies and the board, he said.

The company's North Island suppliers would also receive the equivalent of 4.2c a kg from their half-share of subsidiary New Zealand Dairy Foods. They also got an $80 million capital payment last year as part of the merger with South Island Dairy Co-op (Sidco), Mr Milne said.

The year's payout is 12c a kg better than the previous season and reflected a good performance in a particularly challenging year which included record milk flows in both islands, the problematic commissioning of new plant at Te Rapa, and the integration of Sidco, he said.

Mr Milne said the company budgeted for a 3c a kg impact from commissioning delays but the total was 5c.

The company had revenues of $3.4 billion for the season, compared with $2.4 billion in the previous year, and its factories processed 570.3 million kg of milksolids, or 6.8 billion litres, into 900,000 tonnes of dairy products.

Mr Milne said the company forecast a return to farmers of more than $4 a kg for 2000-01 but it was very dependent on the huge influences of the exchange rate, and international commodity prices.

The proposed mega-merger of Dairy Group, Kiwi and the Dairy Board, which was supposed to bolster the industry against such influences, failed in March. Mr Milne said the industry structure remained "a hugely important issue" and discussions were continuing with Kiwi.

A more urgent issue for many farmers, particularly in the South Island, is the company's moratorium on taking new milk supply.

Mr Milne said the moratorium, due to end in September, would be lifted but not before farmers had endorsed a new share structure which more accurately reflected the cost of processing additional milk.

"We want shareholders to vote on a proposal to make sure new shareholders pay about the right price to come into the company," he said.

An announcement on details of the proposal is expected today.