Fonterra’s Dairy Stock Pile Set To Shrink
March 30th, 2009
Good news for anxious Fonterra suppliers concerned about weak markets. The co-operative will have worked through its shipment backlog by August meaning stockpiles which have filled warehouses around the country will be drawn down. The dairy company was running 2-3 weeks behind normal deliveries as at Jan. 31 after opting to hold back product before Christmas. CEO. Andrew Ferrier, says “If we had pushed inventories out before Christmas we would have hammered the market.”
Ferrier is also upbeat about Fonterra’s overall financial position. The seasonal peak of production pushed Fonterra’s debt gearing up to 61.5% at Jan. 31, from 57.4% at July 31 last year. He says at that time of year “we have an enormously steep production curve – farmers are producing a huge percentage of our requirements and we haven’t sold that yet.” Ferrier has “not one iota of concern” about the gearing level because the company immediately swaps its overseas debt back into Kiwi dollars. While the falling NZ dollar lifted the value of foreign debt by $900m, Fonterra has hedging of a similar amount which sits on its balance sheet as an asset. Let’s hope he’s right.
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