Fonterra, the world’s largest dairy processor, said net profit for the year to July 31 was NZ506 million (317 million), up from NZ179 million the previous year.
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The forecast total payout available to farmers in the 2015/16 season is now between NZ$5/kgMS and NZ$5.10/kgMS.
Fonterra confirmed a payout for last season of NZ$4.40 per kilogram of milksolids and a dividend of 25 cents per share.
That’s why the interest-free loan Fonterra is offering its farmer shareholders doesn’t have to be repaid until the farmgate milk price or advance rate rises above the $6/kgMS mark.
The cooperative has increased its forecast payout for the 2015/2016 season by 75 cents, through a boost in the farmgate milk price rather than the dividend.
The move will increase the output of milk, as well mean a modernisation in the way the milk is packaged: induction-sealing will be employed, which is beneficial in that the product is sealed after the container has been filled and capped, which allows for freshness-retention and leak-prevention. The increased payout is still close to half the record NZ$8.40 paid in 2013-14, reducing farm incomes and slowing economic growth.
Fonterra chief executive Theo Spierings said this year’s market conditions were the most hard he had experienced.
Fonterra’s high debt levels continued to rise, after the company began offering around NZ$430 million in interest-free loans to its struggling farmers.
Chairman John Wilson said extremely challenging trading conditions globally had affected all parts of the business, with global dairy prices falling.
Fonterra has also lowered its forecast milk production for the season by 5 per cent and was now tracking 8 per cent down on last season on a weekly basis.
“We focused on improving our sales mix, achieving more efficiencies, maximising our gross margins and achieving our strategic goals faster”, Mr Spierings said.
Wilson said a lift in profitability in the second half of the financial year was expected to carry through into the current financial year.
With capacity now more in line with current expectations of milk growth, the co-operative would have a reduced capex spend in 2016 of $900 million, he said.
As a result of that review, the company will cut 750 jobs, up from the 523 previously announced, resulting in savings of $103 million a year.
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The figure is 183 percent higher than last year, but much lower than previous years’ profits.
