"It is a record payout, record production level and record payout per kilogram of milksolids."
Stuart said the company indicated to farmers from April that the payout would be about $5.30, but then experienced a difficult May of plunging world commodity prices and rising milk volumes in New Zealand.
Farmers supplied about 90 per cent more milk than expected in May, due to good weather and apparent attempts to capitalise on the high payout after a $4 payout was forecast for the new season.
The milk was worth only about $3.50 to the company, Stuart said.
As well, the rising New Zealand dollar also caused a writedown of stocks by about $366 million.
"The directors had to make a decision whether to maintain the payout at the announced level of $5.33 or revise it to $5.28, which would have been the net effect of paying out all the earnings and breaking even."
The forecast figure was maintained because of the "relative immateriality" of the $50 million, or 4.5c a kg of milksolids, against the company's $4.4 billion equity and $13.9 billion turnover, Stuart said.
Canterbury University accountancy lecturer Alan Robb criticised a lack of detail in the accounts.
He said Fonterra was making much of its "new economics", including rating agency Standard & Poor's assessments of share value and commodity milk price, or CMP, as measures of its performance.
The CMP is a theoretical estimate of the price an efficient commodity producer could pay for milk and still make an adequate return on capital.
"But rather than bringing certainty and reliability to Fonterra's reported results, this introduces more subjectivity about the reported profit and the strength of its balance sheet," Robb said.
"The CMP is the basis for valuing inventories. A small variation in the CMP can result in a large movement in the reported profit.
"Fonterra's balance sheet shows inventories of $3.55 billion. Not all will necessarily be affected by the CMP, but even if only one-quarter are, then a 5 per cent error in estimating CMP means a $44 million difference in reported profit.
"So this year's result could have been a loss of $6 million or as high as $94 million."
Robb said the balance sheet reported on Fonterra's website was highly summarised, but details lodged with the Stock Exchange showed that the cash position had deteriorated considerably below October forecasts.
"The cash balance is only $37 million compared with a forecast figure of $80 million, and borrowings are about $5 billion compared with a forecast figure of about $4 billion.
"At least half of this deterioration is due to the fact that the net cashflow from operations was down on forecast by $525 million, although shareholders and analysts would not know this because Fonterra omitted any cashflow data from their annual results presentation."
Stuart said revenue from business unit NZMP's sales of commodities and ingredients was $7.8 billion, and from consumer goods subsidiary NZ Milk $5.6 billion.
Fonterra Enterprises contributed $500 million, mostly from the rural supply companies RD1 and Town and Country.
The redundancy of 141 staff had cost $11.7 million, with a further $20.8 million expected to go to 300 departing employees this year.
The company's balance sheet reflected the use of the purchase method of accounting for the merger, including the revaluations of brands and other intangible assets, fixed assets and investments.
Total assets of $11.8 billion were $1.9 billion higher than the formation companies at May last year, the biggest movement a $1.1 billion rise to $1.5 billion in intangible assets from a write-up of brands, mostly patents, partly offset by writing off the goodwill in the formation firms.
Investments fell $129 million to $461 million, including a $28 million writedown after the liquidation of the Food Solutions firms implicated in the Powdergate scandal.
Fonterra
nzherald.co.nz/dairy
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