Fonterra upbeat despite $300mil fall in sales

Sales have slumped by more than a quarter of a billion dollars but dairy giant Fonterra says life is looking brighter as it slashes debt. Revenue for the six months ending January 31 was $7.7 billion, down from $8 billion the previous year. Chief executive Andrew Ferrier said there had been volatility in international prices and exchange rates during the period reports The NZ Herald. However, lower average selling prices that wiped more than $1.6 billion off revenue had been largely offset by increased sales volumes worth $1 billion and a positive impact from net foreign exchange worth $300 million, Ferrier said. Customer demand had increased during the period as consumer confidence improved, he said. "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." During the past five months the average selling price for whole milk powder in Fonterra's online auction had stayed within a band of about US$3250 ($4600) to US$3600 a tonne. "In aggregate I think we're very happy where we are now," Ferrier said. Fonterra reaffirmed its milk price forecast for this season of $5.70 a kg of milksolids and a distributable profit range of 40-50c a share, of which 10-30c would be retained. Fonterra's balance sheet had been bolstered by a net equity inflow of $263 million after a capital structure change allowing farmers to buy more shares than required by their milk production. Chairman Sir Henry van der Heyden said the capital structure changes had strengthened the co-operative and provided a more stable base as it pushed forward with its strategy.