Dairy giant Fonterra was well placed ahead of the anticipated softening of prices as global production increased, chief operating officer Andrew Ferrier said yesterday.
‘‘We are well positioned having completed our first half of the year with $2.5 billion more available for payout and while prices are easing somewhat as supply increases in response to these higher prices.''
Fonterra did not anticipate any sharp falls in prices given the overall strength of the market and other factors such as the demand for grain and its use in biofuels, he said.
The co-operative released an improved result for the six months ended November, with revenue increasing by $853 million in the period to $7.3 billion.
Fonterra completed the first half of the season with $4.5 billion available for payout to suppliers, compared with $2 billion in the previous corresponding period (pcp).
Fonterra had already indicated its payout would increase substantially in the seasons ahead.
Chairman Henry van der Heyden said the result reflected higher prevailing prices in a market where supply had been tight, as well as good performances across the whole Fonterra business.
The selling price in the first half more than offset the higher average exchange rate of US75c. ‘‘At the same time we see steady increases in the returns from our equity investments.''
Returns from equity investments, excluding royalties, were up $46 million to $72 million for the six months.
The higher milk price meant Fonterra's total cost of goods sold, including payout to suppliers, was $1 billion ahead of the comparable period at $6.4 billion, he said.
Total operating expenses, which included sales, marketing, administration and other operating costs, were $841 million for the six months, down from $860 million in the pcp.
Fonterra's operating cash flow was $77 million compared with $627 million in the pcp when it was aided by a strong sell-down of inventory early in the season.
Mr Ferrier said that while the high commodity prices had put pressure on margins in the ingredients and consumer brands businesses, both parts were performing ahead of expectations.
Fonterra also advised the market it was changing its balance date from May 31 to July 31, with immediate effect.
The change only applied to financial reporting dates and not the June 1 to May 31 season. The payout for the current season would be based on the results for the 14-month period from June 1, 2007 to July 31, 2008.
