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Fonterra says revenue has dropped but it is keeping its milk price payout at the $5.70 the board announced in November.
The dairy giant's financial results for the six months to January report higher sales volumes which helped to maintain evenues during a period of recovering dairy ingredient prices globally.
CEO Andrew Ferrier says the company has faced continued volatility in both international prices and exchange rates during the half year, with revenue down 3.7% to $7.7 billion.
However, lower average selling prices were largely offset by growth in product volumes sold and positive net foreign exchange impacts.
Ferrier says demand from customers increased through the half year as consumer confidence continued to improve in key markets around the world.
"This led to an increase in product sales, meaning our inventory levels were also at more normal levels compared with the unusual highs of a year earlier, during the worst of the financial crisis."
He says the lower inventory value, combined with equity inflows from capital structure initiatives, contributed to a significant improvement in Fonterra's interim balance sheet position, with debt gearing at 53.3% compared with 61.5% a year earlier.
Fonterra Chairman Sir Henry van der Heyden says the strong recovery in global dairy prices underpinned the improved milk price performance in the six months.
Ferrier says while there is still some volatility in global dairy markets, there are recent signs of stability returning.
"Although there is an element of uncertainty as to how supply and demand factors will influence prices, the recent stability means the outlook is positive for the balance of this year and into 2010/11."
Fonterra Shareholders' Council chairman Blue Read says it is extremely satisfying to see a strengthening of the co-operative's balance sheet.
"The bolstering of the balance sheet includes the positive impact from $263 million that was raised from shareholders in January, following the first two stages of a capital restructuring of our cooperative that was approved by shareholders in 2009," he says.
Read says the improvement helps the co-op manage continued volatility in international prices and uncertain world markets.
"It is heartening to see in uncertain times that our co-operative's forecast Milk Price for the 2009/10 season has been maintained at the $5.70 per kgMS announced in December 2009," he adds.
