Fonterra shareholders could be about to receive the second-highest payout in the dairy company's history if markets stay at current levels.
The dairy co-operative chairman, Sir Henry van der Heyden, hailed yesterday's release of its interim accounts as a solid result, which indicated a payout of about $6 a kg of milk solids, made up of a milk price of $5.70 and a forecast total dividend payment of between 20c and 30c a share, was likely.
Last year the payout was $5.20kg/ms.
Fonterra will pay shareholders an interim dividend next month of 8c a share.
Sir Henry said while revenue for the six months to January 31 was down $300 million, there had been an increase in the volume of product sold amid signs markets were once again growing.
Chief executive Andrew Ferrier said the financial year had started with low prices which improved, and while there was risk of further volatility, prices had stabilised in recent months.
Milk flow was 2% higher than last year, driven by South Island farms which were 8% to 9% up on last year, but flows were 1% to 2% lower in the North Island, which accounted for two-thirds of Fonterra's milk production.
Sir Henry said if those trends continued to the season's end, he expected total milk production to be higher than last year.
Earnings before interest and tax (ebit) in New Zealand, Australia, Asia, Africa, the Middle East and Latin America were all on track to exceed last year, with forecast growth of up to 20%.
While it was a solid result, Fonterra's finances were hit hard by unfavourable exchange rates and a flat market resulting in a 3.7% decline in revenue at $7.7 billion compared with $8 billion a year earlier.
The revenue figure did not include $1 billion generated by joint venture companies, in which Fonterra did not have a controlling stake.
The lower revenue was due to lower average selling prices, with Fonterra Trade and Operations reporting the average selling price for ingredients in United States dollar terms was 20% to 30% lower than a year earlier.
But the volume sold in the period under review earned the company $1 billion extra than for the previous corresponding period (pcp) and there were hedging gains of $338 million compared to a $1.6 billion loss for the pcp.
Fonterra has strengthened its balance sheet in part due to lower inventories but also through lower total liabilities, $11.2 billion compared with $14.1 billion.
Included in that, net interest-bearing debt was lower at $5.6 billion compared with $6.8 billion pcp.
Net finance costs were $172 million, well down on the $368 million pcp, with $60 million of the reduction attributed to lower debt levels and the cost of borrowing and $160 million to changes in the fair values of interest rate hedges.
Operating expenses were 5.8% higher, due to more investment in advertising and promotion to grow the company's share of its regional consumer brand business, but excluding that, operating expenses were flat.
Chief financial office Jonathan Mason said lower inventories, $4.2 billion compared with $5.1 billion, careful working capital management and higher product prices, helped lower the company's gearing from 61.5% a year earlier to 53.3% and it was on target to fall even further by year's end.
