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NZ's Fonterra posts profit dip as bad weather hits production

[SYDNEY] New Zealand dairy group Fonterra reported an 11 per cent fall in full-year profit on Monday after bad weather hampered milk production, but gave an upbeat outlook for the coming year.

The world's largest exporter of dairy products reported net profit after tax of NZ$745 million (S$731 million) for the 12 months ended July 31, down from NZ$834 million a year ago. The result was slightly below expectations of about NZ$757 million, according to five analysts polled by Reuters.

Full-year revenue rose to NZ$19.23 billion against NZ$17.20 billion a year ago.

"Despite lower milk volumes due to poor weather in parts of the season, the business delivered a good result by prioritising higher value advanced ingredients," chairman John Wilson said in a statement.

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Fonterra had been able to deliver on its forecast dividend despite changing conditions, and had continued to boost efficiency and develop new revenue streams, he said.

"We are well positioned to deliver higher volumes and new product formats," Mr Wilson said.

Fonterra has been shifting its business from relying on milk powder shipments to selling value-added consumer products to ride out volatile global dairy prices.

Shares in Fonterra edged up 0.7 per cent to NZ$6.14 by 2315 GMT, in line with the domestic market.

The company announced a full-year dividend of NZ$0.40 per share, unchanged from the previous year, and maintained its earnings per share outlook for the 2018 year of NZ$0.45-NZ$0.55 per share, as declared in March.

It also maintained a forecast to lift the farmgate milk price for the 2018 year to NZ$6.75, which would take the total payout to farmers in the 2017/18 season to NZ$7.20-NZ$7.30 per kilogram. The farmgate milk price for the year ending June was NZ$6.12 per kilogram, just short of a NZ$6.15 forecast in May.

"With the milk price likely to be circa 60 cents higher, this would indeed be a step up in financial performance," said Nathan Penny, rural economist, ASB Rural.

Demand for dairy has been picking up internationally over the past year.

Global dairy prices have risen more than 10 per cent since April, data from the Global Dairy Trade Price Index shows, with adverse weather in major exporters underpinning gains.

REUTERS

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