26 July 2002

World commodity price drop blamed for loss

NEW Zealand dairy giant, Fonterra, has reported a NZ$50m (£15.4m) loss for its first year of trading, to May 31, 2002.

The co-op, which had been hailed as a prime example of how British farmers should improve efficiency and profitability, blames falling world commodity prices and the strong NZ$.

Set up in October 2001, it is New Zealands largest company and among the biggest dairy companies in the world, handling over 90% of Kiwi milk, and generating a turnover of NZ$13.9bn (£4.2bn).

However, Fonterra had to dip into reserve funds to prop up the 2001/2002 payout to its 13,000 farmer members. Having promised a record payment of NZ$5.30/kg milksolids (15.8p/litre) earlier in the year, it was faced with a 90% increase of milk supply in May, worth only NZ$3.50/kg (10p/litre) on the open market.

The merger also meant assets, liabilities and equity of the three original businesses had to be revalued, cutting earnings by NZ$130m (£40m).

Fonterra will now reduce its price for the current milk year to NZ$2.70/kg (8p/litre), well down from its original forecast of NZ$4.50/kg (13p/litre). &#42