The Country 29/05/25: Miles Hurrell talks to Jamie Mackay

Fonterra’s chief executive fires the shot opening for the forecast milk price for the 25/26 season. And it’s a good one, with the genuine prospect of two $10 payments in a row! We also look at a potential final dividend and a return of capital from the consumer brands divestment.

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Episode Transcript

Speaker 1 (00:00):
It is.

Speaker 2 (00:00):
Today's a big news story the Q three business update
from Fonterra, and the most eagerly awaited number was the
opening shot for the twenty five twenty sixth season. The
price range is from eight dollars to eleven dollars, which
is great, But somehow, Miles Hurrel and I'm struggling with
the maths on this. The midpoints ten dollars rather than

(00:20):
nine point fifty. Why is that?

Speaker 1 (00:22):
Yeah, get a Jamie Well, Well, firstly, it's not a midpoint,
is it. I think that we're signaling here. We feel
very confident as we sit he today that ten dollars
is where we see the market both for the year
that we're in currently but also the year ahead. But
you know, there's still we're dealing in a volatile world
and the geopolitics out there at the moment. So we're
just signaling to our tour farmers that there might be

(00:44):
a little bit more downside than upside from where we
sit here. So not a midpoint where we're paying our
farmers on the basis that ten dollars is where we
see the year and will reflect that as the year
goes on. But no, no, it's a pretty good start.
I think of the feedback guys there from farmers this
morning has been very positive.

Speaker 2 (01:02):
Well, I'm sure it is if you can get ten
bucks two years in a row. Some other industry commentators,
miles are suggesting that there could be a softening of
dairy prices in the second half of the twenty five
twenty sixth season, and there's a lot of stuff, as
you well know, happening out there in the world that
could cause that.

Speaker 1 (01:19):
Yeah, and that's fear that that you know, the volatility
that we see out there, dure politics and you know,
wars that are underway and tariffs and all these sort
of things that just just create uncertainty, I guess for buyers.
And so that's the bit that we need to be
mindful of. But I think when they're saying the market
will come off in the second half, you know, the
spot market at the moment is above the ten dollars

(01:42):
if you find on GDT on a spot basis, and
so that's probably a reflection of that. We do see
that coming back, but overall, still still a very comfortable
ten dollars as we close the books of this time
next year, you will.

Speaker 2 (01:54):
Take farmers care about milk price, the dividend price, and
the share value and the return on or of capital.
So let's just go from the milk price, which is
really good to the potential dividend. You've upped the anti
awebit on what that could be, so that's going to
be another windfall for farmers.

Speaker 1 (02:15):
Yeah, and it just shows that despite a decent milk price,
that the team are focused and our jobs to get
a better return above the milk price and watch our
costs and focus and invest in the future, and the
team have done that, and so yeah, the returns for
the three quarters of this year are very positive. We

(02:35):
have narrowed the range for the full year with three
months ago, so that gives us some confidence of this
current year. We're a couple of months away from thinking
about what the year ahead looks like, and we'll talk
to the market at the right time. But the team
team are focused and hopefully we're seeing that they're delivering
and that's that. So I think reflective in the year
price as well.

Speaker 2 (02:53):
Now, so you've narrowed that a year and earning's range
to sixty five to seventy five sense per share. What
does the payout policy say? It's the midpoint of that,
it's seventy cents. What could potentially, Miles Hurell be a
final dividend for farmers.

Speaker 1 (03:10):
Well, I mean, to your point, sixty to eighty percent
as our guidance on that. So so farmers will work
out for themselves around where we see the outlook for
the full year, the position of our farmers, where we
see the strength of our balance. So all those things
will plan to holdimate. Either the decision on the board
will make you come September that all those things are
actually looking quite quite positive. So farmers will make their

(03:33):
own sort of assessments. But we'll have to wait unfortunately
until we end of September to get that number.

Speaker 2 (03:37):
Well, let me throw a number at you. Fifty cents.

Speaker 1 (03:40):
Well, there you go, there's a number. That's that started
from Jamie Sill. See where that lends on the twenty
fifth of September, will we.

Speaker 2 (03:47):
Now I talked about a return on capital I shares,
but also a return of capital. Now this consumer divestment.
You didn't really come out and say much about that today,
Like I mean, I'm throwing numbers at you again. Two
dollars a share? Could that possibly be the payback to
Fonterra shareholders.

Speaker 1 (04:08):
Yeah, look, and it's again it's far too really to
start to talk about what that number looks like. And
so we are in the thick of that process as
as you should expect, and you know it's not wise
for you to talk about that for both our shareholders
suspective in any potential buyers. But the dual tracks well advanced.
So that's that's the sale to a potential trade buyer
and also an initial public offering, So going down hard

(04:30):
on both of those and ultimately jobs to get value
back to our sharholders. We have signaled a significant capital return,
so farmers will make their own again assessment of what
that looks like. But you know, hopefully towards the end
of the year, we'll be in a position to come
out to our farmers and say this is the likely
value we're going to get for it, this is the
this is the potential capital that we're going to send

(04:50):
back and do you support it. So you know, all
those things are tracking as expected at the moment, but
you know, it's far to to sort of talk about
a number despite the fact that somehow of course.

Speaker 2 (05:00):
Yeah, of course, and myself included field days I put
it to you, is going to be wild enough buoyants
the right word. It's certainly going to be positive from
the dairy farmer's point of view.

Speaker 1 (05:11):
Yeah, I think so. It's been a relatively cup of
quiet field days, if I can recall. So. Yeah, I'd
like to think that that farmers are feeling feeling boyant.
You're moving. The oci cut yesterday is another sort of
supporter of that, I think, And in fact we've got
some decent milk price and some earnings out there. I
think it's a bit of the food capital that farmers
haven't spent for the last couple of years. So maybe

(05:33):
all all those stars do aligne, but ultimately farmers are
make their own calls on that.

Speaker 2 (05:38):
Miles Harrel, thanks for your time today on the country.
Congratulations on a good opening forecast shot and we'll see
you at field days.

Speaker 1 (05:45):
Good thanks for rush Joys