Fonterra Co-operative Group Ltd has revealed a NZ 50 cent increase in its 2024/25 forecast Farmgate Milk Price midpoint, now sitting at NZ$9.00 per kgMS for New Zealand farmers.
The company also announced its FY25 earnings guidance of 40-60 cents per share, as revealed in an ASX announcement.
CEO Miles Hurrell attributed the increase to rising global dairy prices and tight milk supply in key producing regions.
“I’m pleased to be announcing an increase in this season’s forecast Farmgate Milk Price, which I’m sure will be welcome news for farmers, particularly when combined with the 55 cent total dividend for FY24 also announced by the Co-op today,” said Hurrell.
Fonterra’s updated Farmgate Milk Price range for the 2024/25 season is between $8.25 and $9.75 per kgMS.
Hurrell emphasised the cautious approach, noting the early stage of the season. “We’ve also announced today our forecast earnings for FY25 of 40-60 cents per share.”
“The forecast earnings range reflects an expectation we will maintain strong margins in all three of our sales channels, while also investing in the Co-op’s IT & digital transformation and incurring higher tax expenses,” he added.
In light of these developments, Fonterra is set to face new tax implications. Chief Financial Officer Andrew Murray confirmed that, following several years of strong performance, the company had exhausted its tax losses in FY24.
As a result, Fonterra will now begin paying taxes, which will affect its future earnings reports.
“When we declare a dividend from FY25 and beyond, imputation credits will now be available to be attached to our dividend,” Murray stated.
He also explained that the changes in tax treatment for supply-backed shares would lead to higher taxes paid by Fonterra.
“While this does not impact the operating performance of Fonterra, it will reduce our reported earnings per share in future years, as Fonterra will have paid the tax on the cash to be distributed.”
