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Fonterra scales down share earnings

NZN 21/03/2017 Jonathan Underhill

Fonterra has cut its forecast for full-year earnings per share while maintaining its projected milk payout, citing volatility in returns from ingredients, tightening margins and potential increased milk supply in the autumn.

Per-share earnings are forecast at 45 cents to 55 cents while the farmgate milk price payout was affirmed at $6 per kilogram of milk solids, giving a forecast available for payout of $6.45 to $6.55 before retentions for a fully shared-up farmer.

It had previously projected per-share earnings of 50-to-60 cents for a payout of $6.50 to $6.60 before retentions.

"The impact of more volatility in product stream returns in our Ingredients business, some tightening of margins in the coming months, and the potential for extra milk in the autumn could result in some pressure on our earnings in the second half," chairman John Wilson said in a statement.

"The board considered these factors and, while continuing to have confidence in achieving a target dividend of 40 cents per share, has revised the forecast earnings per share range to 45-55 cents to reflect the additional volatility."

"We remain positive but cautious, and this is reflected in our interim dividend of 20 cents per share and our February decision to increase the advance cash rate paid to farmers earlier in the season," he said.

The dairy exporter downgraded its forecast while releasing first-half results on Wednesday which showed revenue climbed 9 per cent to $9.2 billion. Normalised earnings before interest and tax fell 9 percent to $607 million in the six months to the end of January. Net profit rose 2 per cent to $418 million.

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