Units in the listed Fonterra Shareholders' Fund have fallen 33% to a record low of $5.42, despite the low payout forecast for farmgate milk.
The initial public offering of FSF units was at $5.50 in November 2012, then leapt to a starting price of $6.60 on listing and within five and a-half months touched a record $8.09 in May 2013.
However, since December 2013 they had traded down within a range of $6.60 to $5.60, and yesterday touched $5.42, or 33%, down on the $8.09 high.
FSF units are for the first time allowing the public to participate in tradeable dairy sector shares.
They are based on Fonterra's branded products, not farmgate milk, and generally the lower the cost of milk, the larger profit margin products should attain.
Craigs Investment Partners broker Peter McIntyre said the key reason for the unit downturn was the poor first-half 2015 trading result, where earnings before interest and tax (ebit) was down 7% to $376 million, and 36% below Craigs' estimates.
''Usually with the farmer payout being down, that should be positive for the units.''
The variances within the result stemmed from several factors, including the need to clear excess product from late 2014 and having higher prices inventory at negative profit margins, a fire at a cheese facility and its Chinese farms being hit by lower domestic milk prices and negative stock valuations.
''There was a silver lining though, with most of the first half ebit generated in the second quarter and those inventory [stock] issues were isolated to trading in the first quarter only,'' Mr McIntyre said.
While the second-half trading outlook was ''cleaner'', Mr McIntyre said Fonterra had given no ''explicit'' ebit guidance and the dividend range was downgraded, based on 65% to 75% payout policy.
That equation implied a ''large second-half turnaround'' of after-tax profit, rising from the first-half's actual $165 million profit to a range of between $265 million and $430 million.
In late March, Fonterra left its farmgate milk price forecast of $4.70 per kg of milk solids in place, and surprisingly cut its forecast dividend payout for the year to a range of 20c to 30c, compared with a previous range of 25c to 35c a share.
The total forecast payout for the year is now $4.90 to $5 per kg - $5 per kg being the estimated average cost of production.
Revenue for the half year to January dropped 14% to $9.7 billion, while Fonterra's net profit for the period fell 16% to $183 million.
