By DANIEL RIORDAN
Dairy giant Fonterra expects to make an operating profit of $5.9 billion in the 12 months to May of next year, returning all but $13 million to its dairy -armer suppliers.
The profit will be on revenue of $14.1 billion, with the volume of milksolids supplied by farmers
2.6 per cent higher than the amount supplied last year to Fonterra's predecessors, Kiwi Dairies and NZ Dairy Group.
The country's biggest company disclosed its forecasts in a prospectus issued for its $200 million capital notes offer, which opened yesterday.
The notes have an initial interest rate of 7 per cent through to July 10 next year, when they will be reset to a margin over the 12-month Government stock rate. At the current Standard & Poor's credit rating of A+ for the company, that margin is 1.7 per cent. The margin will change in proportion to any changes in the credit rating.
Fonterra expects to have assets of $11.9 billion at May 31 next year, including intangible assets (brand values) of $1.8 billion. Most of that figure relates to NZ Dairy Board brands. Shareholders' funds are estimated to reach $5.1 billion.
Brokers expect the issue to be easily oversubscribed.
Macquarie Equities senior investment adviser Arthur Lim noted the company's investment rating was similar to the Government's.
UBS Warburg NZ executive director Andy Coupe said the debt instruments were more correctly described as perpetual bonds, which do not provide investors with the option of converting to shares.
The Fonterra notes will trade on price rather than yield (as with true capital notes), and with liquidity likely to be strong and the returns offered fair, the notes should perform well, said Mr Coupe.
The offer's lead managers are ABN Amro Craigs, Forsyth Barr/Forsyth Barr Frater Williams and Westpac.
Fonterra's is the third sizeable capital notes issue in the past two months.
Guinness Peat Group in September closed its $250 million issue of five-year notes with a coupon rate of 9 per cent. The offer was fully subscribed.
Sky Network Television in October issued $111 million of five year capital notes at 9.3 per cent. The company had sought up to $125 million.
