Fonterra maintains forecast payout, says recent gains not enough for a rise

Fonterra Cooperative Group, the world's biggest dairy exporter, maintained its forecast payout to farmer shareholders for the current season, saying recent gains in whole milk powder weren't enough to warrant an increase.

The Auckland-based company held the forecast at $4.70 per kilogram of milk solids, down from a record $8.40/kgMS last season, while maintaining guidance for a dividend range of between 25 cents and 35 cents per share.

Whole milk powder prices have gained 45 percent at Fonterra's GlobalDairyTrade auctions since December after plunging last year, and recent drought conditions in New Zealand raised speculation the payout might be increased as limited supply pushes up prices. Chairman John Wilson said those gains weren't enough to raise the forecast payout, and that global commodity prices remained volatile.

"New Zealand volumes are down, with continued uncertainty in milk production due to climactic conditions in New Zealand with droughts in Canterbury, Marlborough, Central Otago and North Otago," he said in a statement. "We are advising farmers to continue to be cautious with budgeting and we will update them as the season progresses."

The New Zealand dollar dropped about 10 basis points immediately after the announcement to 75.39 US cents, and was recently trading at 75.43 cents.

Fonterra chief executive Theo Spierings said the company was confident in the long-term fundamentals driving demand for dairy products, and will provide a full business update when it reports first-half earnings on March 25.

Units of the Fonterra Shareholders' Fund, which offers investors exposure to the exporter's dividends, last traded at $5.98, and have slipped 0.5 percent this year.