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Source: Reuters -
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Fonterra says it has lifted its "distributable profit" forecast by 5 cents for the current 2009-2010 season to between 40 cents to 50 cents a share - but does not plan to pass on the extra earnings to its 10,500 farmers.
Distributable profit is the total surplus from Fonterra's business available for distribution to farmer shareholders by way of dividend, and was previously estimated last December at 35 cents to 45 cents a share.
The company says it is making no change to the "target dividend range" of 20 cents to 30 cents a share.
"This would indicate 10 cents to 30 cents a share...will be retained," it says.
The forecast milk price of $5.70/kg milksolids for the season is also unchanged.
Instead of combining the value of the milk with returns from investments, Fonterra is now setting a price for the milk, then paying an additional dividend.
Fonterra chief executive Andrew Ferrier says the 5 cent increase in the distributable profit is driven primarily by gains arising from divestments, improved joint venture returns and lower funding costs through improved working capital.
"Value return" was previously used to describe the amount of distributable profit paid out to farmer shareholders, but the company says this phrasing is no longer relevant as profit was now being distributed via dividend payments.
Similarly, payout is no longer a relevant term because farmer shareholders could now hold both supply-backed and dry shares.
Earlier this year the co-operative offered its shareholders the opportunity to buy more shares than they needed to in order to match their milk supply, and about one third of Fonterra's farmers took up the offer.
