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Fonterra - Source: ONE News -
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Federated Farmers says it welcomes the 10% boost Fonterra announced for its forecast distributable profit in the current 2009-2010 season, not the least because the extra money will be retained by the company, rather than paid out to farmers.
Lifting the range of the expected distributable profit by 5c to between 40c and 50c a share, compared with the forecast last December, had put into effect the company's new retentions policy, said Federated Farmers dairy vice-chairman John Bluett.
The company now has a forecast 10c to 30c a share available to strengthen the cooperative.
"This is something Federated Farmers has asked for and we are very happy to see this new retentions policy in action," Bluett said.
"It could be that shareholders are seeing the first green shoots of farmers' capital investment in the cooperative".
The forecast represented an increase of between 10% and 12.5% in distributable profit, partly because of increased earnings from one-time items such as asset sales.
The distributable profit does not include earnings from raw-milk processing, which are still estimated to pay farmers with "wet" shares $5.70/kg milksolids.
Fonterra has started changing its capital structure, and now allows 10,500 farmer-suppliers to hold "dry" shares not directly tied to milk production.
Farmers can hold a parcel of up to 20% of the number of shares their milkflows required them to hold, and the cooperative will make one payment for milk, and pay a separate dividend on each share a farmer holds.
The next stage of its re-structure plan will ask farmers to surrender the right to have the company buy back their shares directly, and instead dispose of unwanted shares through trading with other cooperative members.
This would relieve Fonterra of the redemption risk when something such as a drop in production, or a rival poaching Fonterra suppliers might require significant spending by the cooperative on buying back shares.
