The giant dairy co-op revealed the interest-free loan offer on the back of its announcement that the forecast payout for the 2015-2016 season had been cut to $4.25-$4.35 on the back of weak demand and surplus supply.
Fonterra chairman John Wilson said Fonterra was uniquely placed to help its farmers because of the co-operative’s underlying strength and is providing Fonterra co-operative support for farmers in the form of a loan to help farmers deal with the challenging conditions.
«This support is all about standing together as a co-operative and using our collective strength to help our farmers get through these tough times.»
The co-operative will provide all Fonterra share-backed farmers the opportunity to apply for Fonterra Co-operative Support amounting to an additional 50 cents per shared-up milk solids for production for the season. This payment, interest free for two years, will be paid back when the milk price or advance rate goes above $6 per kgMS.
A first payment will be made in October for June to December and will continue until May. Payments will total 50 cents per shared-up milk solids over the season but will be phased from October as transformation savings are delivered. Fonterra Co-operative Support for the first half of the season (June to December) is estimated to be up to $430 million, depending on take-up rates, and will be funded by one-off savings generated by changes the business is making, such as improving working capital.
Fonterra’s forecast for 2015-2016 comprises a farmgate milk price of $3.85 per kilogram of milksolids and an earnings per share in the range of 40-50 cents a share.
Wilson confirmed the milk price forecast reduction from $5.25 kgMS was due to the continued significant imbalance in the global dairy market between weak demand and surplus supply.
«This imbalance and the challenge of lower prices continuing for longer than anticipated is a global issue, which dairy farmers around the world are increasingly grappling with.
«Current prices are unsustainably low and we are seeing them beginning to impact production levels globally. We have confidence that prices will recover over the course of the season. However, it will be a tough season for our farmers.
«The range of possible scenarios is contributing to the uncertainty we are seeing today.
«We know the global dairy market will improve. The hard thing to call at the moment is exactly when and how quickly,» said Wilson
Chief executive Theo Spierings said the key influences of forecast earnings are expected to be:
– the positive impact of the lower farmgate milk price on consumer margins globally for New Zealand-sourced products.
– the contribution from transformation within the business. – movements in New Zealand product mix returns. »
As part of this work and given the current pressures facing our farmers, we have reviewed our capital expenditure for the next two years. As a result we are now targeting a spend of $500-$600 million less for the 2016 financial year.
«We will continue to update our farmers and the market on business performance and the delivery of expected gains from the transformation of the business as the year progresses,» said Spierings.
The co-operative will provide all Fonterra share-backed farmers the opportunity to apply for Fonterra Co-operative Support amounting to an additional 50 cents per shared-up milk solids for production for the season. This payment, interest free for two years, will be paid back when the milk price or advance rate goes above $6 per kgMS.
A first payment will be made in October for June to December and will continue until May. Payments will total 50 cents per shared-up milk solids over the season but will be phased from October as transformation savings are delivered. Fonterra Co-operative Support for the first half of the season (June to December) is estimated to be up to $430 million, depending on take-up rates, and will be funded by one-off savings generated by changes the business is making, such as improving working capital.
Fonterra’s forecast for 2015-2016 comprises a farmgate milk price of $3.85 per kilogram of milksolids and an earnings per share in the range of 40-50 cents a share.
Wilson confirmed the milk price forecast reduction from $5.25 kgMS was due to the continued significant imbalance in the global dairy market between weak demand and surplus supply.
«This imbalance and the challenge of lower prices continuing for longer than anticipated is a global issue, which dairy farmers around the world are increasingly grappling with.
«Current prices are unsustainably low and we are seeing them beginning to impact production levels globally. We have confidence that prices will recover over the course of the season. However, it will be a tough season for our farmers.
«The range of possible scenarios is contributing to the uncertainty we are seeing today.
«We know the global dairy market will improve. The hard thing to call at the moment is exactly when and how quickly,» said Wilson
Chief executive Theo Spierings said the key influences of forecast earnings are expected to be:
– the positive impact of the lower farmgate milk price on consumer margins globally for New Zealand-sourced products.
– the contribution from transformation within the business. – movements in New Zealand product mix returns. »
As part of this work and given the current pressures facing our farmers, we have reviewed our capital expenditure for the next two years. As a result we are now targeting a spend of $500-$600 million less for the 2016 financial year.
«We will continue to update our farmers and the market on business performance and the delivery of expected gains from the transformation of the business as the year progresses,» said Spierings.
Source: Stuff
