16 Nov 2015

More milk moved towards cheese - Fonterra

9:13 pm on 16 November 2015

Fonterra is moving larger volumes of milk into more lucrative finished products such as cheese to take advantage of improved prices relative to whole milk powder, it says.

Cheese and dairy products in Pak n Save Kilbirnie.

Photo: RNZ / Alexander Robertson

The strategy is part of the co-operative's plan to improve its business performance in the face of falling dairy prices globally.

Today, Fonterra announced its forecast earnings per share had risen for the current financial year to 45 to 55 cents.

It said the increase could equate to a total cash payout of $4.95 to $5 per kg of milk solids.

Fonterra chief executive Theo Spierings said capital expenditure was down 37 percent to $258 million, while margins in the first quarter of 2016 had risen from 14 to 23 percent.

He said, with less milk produced this season, the cooperative had taken advantage of its additional capacity to optimise its product mix, while investing in new plants to improve its manufacturing options.

"Returns are still in favour of cheese versus whole milk powder but that may change in the second half of the season.

For our consumer foodservice business around emerging markets in Asia, greater China and Latin America, all volumes are up and continue to turn the wheel of volume for higher value.

"So a change in mix to higher stream returns and, over the last eight or nine months, it's been cheese."