Fonterra Co-operative Group Ltd has announced a lift in its 2024/25 Farmgate Milk Price forecast, increasing the midpoint by 50 cents to $9.00 per kgMS.
The company has also set its earnings guidance for FY25 at 40-60 cents per share.
CEO Miles Hurrell attributes the price increase to improving Global Dairy Trade prices and limited milk supply in key dairy-producing regions.
"This rise in the forecast Farmgate Milk Price will be welcome news for farmers, especially alongside the 55-cent total dividend for FY24 also announced today," Hurrell stated.
The new forecast range for the Farmgate Milk Price stands between $8.25 and $9.75 per kgMS, with Hurrell explaining that the wide range reflects the early stage of the season. He remains optimistic about the company’s margins across all sales channels despite challenges.
Hurrell also noted the company’s focus on digital transformation, which is driving investments in IT, as well as an increase in tax expenses. Fonterra’s strong earnings over recent years have depleted its tax losses, meaning the company will begin paying taxes moving forward.
Chief Financial Officer Andrew Murray explained the implications of this tax change.
“From FY25 onwards, dividends will include imputation credits, allowing shareholders to benefit. However, this change will lower Fonterra’s reported earnings per share, as more tax will be paid on the distributed cash.”
Fonterra’s announcement provides positive news for both farmers and investors as the cooperative continues to adapt to changing market conditions and operational requirements.
