7 Aug 2015
Review: Fonterra farmgate milk price forecast - Westpac
FXStreet (Bali) - Westpac sent a note to clients with their take on the latest Fonterra milk payout forecast for 2014/56 and 15/16.
Key Quotes
"Fonterra lowered its farmgate milk price forecast for the 2015/16 season to $3.85 per kilo of milksolids, from an initial forecast of $5.25/kg."
"This is similar to our forecast of $3.70/kg and within the range of market forecasts between $3.50 and $4.00/kg. In recognition that the dairying industry is facing a very tough season, Fonterra has offered some modest relief on two fronts."
"Firstly, it will help farmers to smooth cashflow across seasons, by providing a loan of 50c per shared-up kilogram of milksolids. The loan would be interest-free for two years, and would be repaid once the farmgate milk price rises above $6/kg."
"The second measure is less encouraging than it first seems. Fonterra is forecasting improved earnings of 40-50c per share for the added-value side of the business."
"However, Fonterra's stated dividend policy is to pay out 65-75% of earnings over time. Taking the midpoints of these ranges would give a dividend of 32c a share, not a significant improvement on last season's forecast of 20-30c per share."
Key Quotes
"Fonterra lowered its farmgate milk price forecast for the 2015/16 season to $3.85 per kilo of milksolids, from an initial forecast of $5.25/kg."
"This is similar to our forecast of $3.70/kg and within the range of market forecasts between $3.50 and $4.00/kg. In recognition that the dairying industry is facing a very tough season, Fonterra has offered some modest relief on two fronts."
"Firstly, it will help farmers to smooth cashflow across seasons, by providing a loan of 50c per shared-up kilogram of milksolids. The loan would be interest-free for two years, and would be repaid once the farmgate milk price rises above $6/kg."
"The second measure is less encouraging than it first seems. Fonterra is forecasting improved earnings of 40-50c per share for the added-value side of the business."
"However, Fonterra's stated dividend policy is to pay out 65-75% of earnings over time. Taking the midpoints of these ranges would give a dividend of 32c a share, not a significant improvement on last season's forecast of 20-30c per share."