New Zealand dairy cooperative Fonterra has announced its second-highest ever payout for milk, as well as record exports and a bigger profit.
Fonterra chairman Sir Henry van der Heyden says the company has come through the global recession in very good shape and with the strongest balance sheet since the company was formed in October 2001.
Sir Henry says Fonterra collected a record amount of milk last season of 1.286 million kilograms of milk solids and exported a record 2.1 million tonnes in the year to August.
Fonterra made a profit of $685 million in the year to July, an increase of 12% on the previous year.
Fonterra confirmed on Thursday it will pay its farmer shareholders $6.70 per kilogram of milk solids for the 2009-10 season.
However, farmers will get a lesser share of that in their pockets than previously, as Fonterra is holding back more of its profit to finance growth.
Farmers will get $6.10 per kilogram of milk solids, plus a dividend of 27 cents per share. Fonterra is to retain 33 cents per share. This compares with a payout of $5.21 per kilogram the previous year, when Fonterra retained 1 cent.
Fonterra's profit was boosted by $174 million in assets sales. Nevertheless, sales rose 4% to $16.7 billion, due to better international dairy product prices and a slight rise in volumes, particularly from Asia.
Fonterra also cut debt after raising $459 million from farmers and retaining profits, allowing it to reduce interest costs.
However, a stronger New Zealand dollar dented returns, while costs rose due to the higher price of milk.
Looking ahead, Fonterra lifted the bottom end of its forecast range by 10 cents and is now picking a payout of between $6.90 and $7.10 per kilogram of milk solids.
Dairy farmers are delighted with the payout, saying farms can now recover after the recession and drought.
Robin Barkla, vice-chairman of Dairy Farmers of New Zealand, which is part of Federated Farmers, says the payout is a great relief.
However, South Taranaki farmer Bryan Williams cautions that catching up on necessities such as fertiliser will chew through most of the money.
Mr Williams's farm just south of Patea was hit hard by drought two years ago and left dry again last summer. He says he will spend what is needed for the farm, but is not yet ready to splash out.
New Plymouth tractor dealer Peter Naus says previously cautious farmers are now replacing machines they have been nursing along with repairs.