After reporting strong half-year results, Fonterra CEO Theo Spierings is addressing media gathered at the co-operative's headquarters in Auckland's Viaduct Harbour.
Fonterra said its first half net profit shot up by 123 per cent to $409 million, allowing the company to double its interim dividend payout to 20 cents a share.
The company's normalised earnings before interest and tax came to $665 million, up 77 per cent.
The co-operative, which isNew Zealand's biggest exporter, said it also intended to declare a 20c per share dividend in two payments of 10c each in May and August - bringing the total for the year to 40c - to help farmer cash flows.
As expected, Fonterra left its 2015/6 farmgate milk price unchanged at $3.90 per kg of milksolids, which compares with the average breakeven point of $5.25 a kg.
• Low milk prices mean reduced input costs for Fonterra, which improves its financial performance and allows the company to increase its dividend.
• The size of the increase in part reflects same six-month period a year earlier, which was hit by abnormally high inventory costs.
• Much of the improved performance came from a 108 per cent increase in earnings from the value-added part of Fonterra that is responsible for branded products (such as Anchor cream cheese and mozzarella.) Much more milk - 235 million litres - has been shifted higher into added value value products.
• Earnings from the ingredients side - responsible for the commodities such as whole milk powder - were up by 27 per cent - reflecting increased efficiency.
• Fonterra's improved financial means it can double its first half dividend to 20c. In addition, it plans to pay its final dividend for the year - also 20c - in two payments earlier in the year - to help farmer cashflows.
Our management is aware of the need for strong performance to ensure that we get every possible cent back into farmers' hands during a very tough year.
The sharp increase in earnings came from low milk prices, which are Fonterra's main input cost, and a strong performance from the value-added side of the business - consumer and foodservice - which reported a 108 per cent increase in normalised earnings before interest and tax (EBIT) to $241 million.
The commodities side - ingredients - reported a 27 per cent lift in EBIT to $617 million.
Fonterra said it had shifted an additional 235 million litres of milk higher up into the value chain and not consumer and foodservice products over the half.
Chairman John Wilson said that the supply and demand imbalance in the globally traded dairy market had brought prices down to unsustainable levels for farmers around the world, and particularly in New Zealand. The strong New Zealand dollar has also had a negative impact on the milk price.
See some of the profit numbers in a Fonterra Tweet here:
"Our management is aware of the need for strong performance to ensure that we get every possible cent back into farmers' hands during a very tough year," he said in a statement.
"We have lifted profitability from last season to this season, resulting in higher earnings per share to help offset low global dairy prices," he said.
Fonterra said its farmgate milk price of $3.90 per kg reflects low global dairy prices, with whole milk powder decreasing around 17 per cent this season to date.
The forecast total available for payout of $4.35-$4.45 per kg equates to a forecast cash payout of $4.30 per kg after "retentions" - funds retained by the company.
Wilson said the timing of the dividend payments was a specific response to the current challenging, financial conditions farmers are facing and did not signal an intention to move away from Fonterra's normal practice of twice-yearly dividends paid in April and October.
Chief executive Theo Spierings said the co-operative's working capital had improved significantly, and our inventory levels are lower than in recent periods for this time of year - down 9 per cent in volume terms due to strong sales. On the debt side, Fonterra's with gearing ratio dropped to 49 per cent from 51 per cent in the previous year.
Fonterra Shareholders' Council Chairman, Duncan Coull, said today's was in line with forecasts, and the expectations of the Council.
He said that the Board's decision to pay out an interim dividend of 20 cents per share, and to accelerate the final dividend payments, would be very well-received by Farmer Shareholders and "go some way to alleviating immediate on-farm cash-flow pressures."
"With the forecast Milk Price remaining at $3.90 per kg/MS, Farmer Shareholders' expectations are that the value-add side of their business will provide them the much talked about counter-cyclical benefits," he said.
