Listen: Fonterra CFO Marc Rivers on milk price and dividend

Fonterra's CFO, Marc Rivers. Photo / Jason Oxenham

Fonterra has dominated rural headlines with yesterday's announcement of a trading halt on the New Zealand and Australian stock exchange, (which has since been lifted), and today's unexpected downward revision of its 2017/18 farmgate milk price and dividend.

Fonterra's CFO Marc Rivers spoke to The Country's Rowena Duncum about what is going on with the dairy co-op.

Fonterra's farmgate milk price has dropped from $6.75 per kg to $6.70, which Rivers says is "still a strong milk price overall," and explains the decision was made whilst reviewing the co-op's full year results.

"We're in the process now of finalising the full year results which will be published on September 13, but in the process of that we could see that we would be coming at, or below, the earnings guidance that we'd announced."

As a result of this Rivers says, "it became necessary for the board to take this decisive action to strengthen the balance sheet in the interest of the co-operative."

The final dividend decision will also be announced on September 13 and Rivers predicts it will likely be "just the 10 cents that was already paid."

"That's not what we had hoped would be the case ... but it's necessary here in the interest of protecting the financial discipline ... for the co-operative which is in all of our stakeholders' interests."

Read more: Fonterra enters trading halt on NZX and ASX

Duncum asks if Fonterra's recent woes are a result of the failed investment with Chinese company Beingmate.

Rivers says although Beingmate is not the reason for Fonterra's issues at the moment, it has caused problems for the co-op over the year, along with other factors.

Listen below:

"Certainly overall for the full year, we've had the challenges of the Danone as well as the Beingmate impairment on top of the underlying business challenge of margin pressure that comes from operating in a very high milk price environment. I think all of those are relative factors here."

It is important for Fonterra to move forward from these setbacks says Rivers and he expects the impact will be "limited to this year."

Duncum asks how Fonterra is going to ensure it operates with more accuracy in the future.

"We are very mindful that we have to do better, both in terms of forecasting and understanding what is certainly a complex business and it's also about doing better on execution and performance, even in a high milk price environment."