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New Zealand’s Fonterra lifts lower end of 2020-2021 farmgate milk price forecast

07 December 2020

Dairy company Fonterra lifted the lower end of its 2020-2021 forecast range on 4 December, increasing the price it pays farmers for milk.

Reuters reports that the revision comes as demand in top market China continues to recover from lows experienced during the pandemic.

The world's largest dairy exporter said it now expects farmgate milk price between NZ$6.70 and NZ$7.30 per kilogram of milk solids (kgMS), compared with its earlier forecast of between NZ$6.3 and NZ$7.3 per kgMS.

 

The dairy exporter's first-quarter earnings were powered by robust Chinese demand for its products, especially whole milk powder, a key driver of the milk price. The company also saw strong demand from wider Asia, it said in a statement.

Fonterra's normalised earnings before interest and tax (EBIT) jumped 40 percent to NZ$250 million ($176.95 million) in the quarter, while revenue slipped marginally to NZ$4.18 billion.

Recovering dairy demand and a plan to refocus on domestic operations helped Fonterra return to an annual profit earlier this year and resume dividend payments to farmers, who make up the majority of the company's shareholders.

However, Chief Executive Miles Hurrell said, "COVID-19-related challenges remain, including how the global recession and new waves of the virus will impact customer demand."

Fonterra retained its fiscal 2021 normalised earnings per share forecast between 20 New Zealand cents and 35 New Zealand cents.

($1 = 1.4128 New Zealand dollars).

Source: Reuters



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