Fonterra cuts full-year earnings outlook, to not pay interim dividend

Dairy giant Fonterra cut its annual earnings outlook on Thursday amid challenging weather conditions in New Zealand and said it would not pay an interim dividend.

Fonterra reduced its full-year earnings range to between 15 to 25 New Zealand cents per share from 25 to 30 New Zealand cents per share, which the company forecast in its fiscal 2018 results in September last year.

Milk supply in New Zealand has been hit by dry weather since the start of 2019.Credit: Erin Jonasson

"Underlying performance of the business is not where it needs to be," chief executive Miles Hurrell said.

The company also increased its 2018-19 forecast farmgate milk price to farmers in the range to $NZ6.30 to $NZ6.60 per kilogram of milk solids, up from a downgraded forecast of $NZ6-$NZ6.30 per kgMS in December.

Milk supply in New Zealand has been hit by dry weather since the start of 2019, prompting Fonterra Co-Operative to cut its forecast milk collections in New Zealand to 1530 million kgMS from 1550 million kgMS.

"While the milk price is strong, the co-op's earnings performance is not satisfactory", Fonterra chairman John Monaghan said.

Higher milk prices, which raised the costs of input for the company's non-milk price products, had added pressure to margins, impacting earnings, the dairy company said.

The company added that its Latin American operations had faced difficult trading conditions stemming from recent geopolitical events in the region.

Fonterra paid an interim dividend of 10 New Zealand cents per share last year and will report its half-year results on March 20.

The company posted its first annual loss in financial year 2018, after profit margins shrunk in part due to higher milk prices the previous year.

Fonterra said it was on track to reduce its debt by $NZ800 million this financial year, based on an asset review it announced in December.

Reuters