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$10b for NZ economy after record Fonterra payout

Fonterra is flying high on the back of a bumper year for dairy exports and contributions from overseas businesses, boosting the cooperative to a 13 percent profit that it says will see more than $10 billion flow into the New Zealand economy.

It announced a record payout of $8.25 this morning, consisting of a 'farmgate milk price' of $7.60 per kg of milk solids 'distributable profit' of 65 cents per share for the 2011 financial year.

That's  $1.55 more than the previous period’s $6.70 and exceeds the former record of $7.90 achieved in 2008. The cash payout (the farmgate price plus dividend) of $7.90 is also a record at $1.53 higher than the prior period’s $6.37. 

Chairman Sir Henry van der Heyden said the record financial performance and milk production meant Fonterra would distribute milk payments and dividends totalling $10.6 billion – $2.4 billion more than in 2010 and $1.5 billion more than Fonterra’s previous best year in 2008.

He said the dividend of 30 cents per share equated to 69 percent of adjusted distributable profit, which was consistent with the board’s policy to distribute 65-75 percent of profit after adjusting for one-off items and other factors.

According to chief executive Andrew Ferrier, Fonterra achieved a 13 percent increase in net profit after tax to $771 million, even after paying farmer shareholders 29 percent more for the milk they supplied.

“Although the business was impacted by higher dairy ingredient prices and a fragile global economy, our underlying profitability showed solid growth over last year due to improvements within our ingredients businesses and the strength of our consumer brands.”

Revenue from the consumer businesses hit a new record of $6.1 billion. Ferrier said the standout segment was Asia/Africa and the Middle East, with normalised earnings rising 12 percent.

In the Australia/New Zealand business segment, however, normalised earnings fell 17 percent. Ferrier said margins were compressed by a fiercely competitive market.

Other highlights of the financial result include:

· A 19 percent increase in revenue to $19.9 billion, a new record.

· The annual dividend is being increased to 30 cents per share, an 11 percent increase on last year’s 27 cents per share.

· Dairy exports for the year totalled 2.1 million tonnes, another record.


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