Soaring kiwi chews Fonterra's revenue

By PAULA OLIVER

Dairy giant Fonterra is starting to suffer at the hands of the rising kiwi, but it is still on track to pay its suppliers more than it did last year.

Revealing Fonterra's financial result for the six months to November 30, yesterday, chief executive Andrew Ferrier said the co-operative had put in a "solid" performance.

The strengthening currency contributed a $650 million fall in revenue, although Fonterra clawed $440 million of that back from stronger ingredient selling prices.

Overall, sales revenue fell by 6 per cent, or $360 million, on the same period last year - the other factor that came into play being a $150 million fall in sales volumes.

Ferrier said this fall reflected higher than usual volumes in the previous period from a sell-off of excess stock.

Fonterra put smiles on its farmers' faces last month when it lifted its payout forecast by 20c to $4.15 per kg of milksolids.

Yesterday Ferrier said that it was difficult to pin down the figures mid-year because of seasonal factors.

The co-operative's income would be reviewed by the board in March, and "if there is going to be any adjustment to the suggested payout it will happen then," Ferrier said.

But farmers' prospects look good, with the amount available for payout as at November 30 sitting at $2.2 billion - $810 million more than at the same period a year earlier.

Last year Fonterra's suppliers were disappointed to receive just $3.63, a big drop from the record $5.30 payout of the previous year.

While revenue at the dairy giant fell during the half year, debt was cut by more than $500 million to its lowest level since the merger.

There was also a $330 million reduction in the total cost of goods sold, $100 million of which came from lower manufacturing costs and further realisation of merger benefits.

Asked about the dry conditions in the South Island he said most farmers there were on irrigated land, so the impact was minimal.

Production to date was 7 per cent ahead of last year in the South Island. Nationally, production was tracking at 2.7 per cent higher.

Ferrier said Fonterra was focused on improving its high-value products businesses, which had small volumes but high margins.

Fonterra figures

Sales revenue

current half year: $5.58 billion

previous corresponding period: $5.94 billion

Cost of goods sold:

current half year: $4.6 billion

previous corresponding period: $4.9 billion

Amount available for payout:

November 30, 2003: $2.2 billion

November 30, 2002: $1.4 billion

Forecast payout:

$4.15 per kg of milksolids