Analysts have trimmed their short-term earnings forecasts for Fonterra because of ongoing strength in dairy prices and what they expect to be higher costs associated with the launch of new products in China.
Units in the Fonterra Shareholders' Fund - a claim on the dividend-paying, or manufacturing side of Fonterra - have been under downward pressure in recent weeks. The units closed down 8c yesterday at $7.54, after reaching a record high of $8.09 last month.
The first GlobalDairyTrade (GDT) auction for 2013/14, the results of which came out yesterday, showed the season had started on a soft note but prices were still 54 per cent above year-ago levels. Share market analysts said prices had been slower to revert back after spiking sharply when the recent drought was at its peak.
Kar Yue Yeo, director of equity research at First NZ Capital, said he had lowered his earnings before interest and tax estimates by $5 million, or 0.4 per cent, for the 2012/13 year, by $75 million (6 per cent) for 2013/14, and by $62 million (5 per cent) for 2014/15.
He said the revisions reflected higher launch and campaign costs for a series of products across major cities in China.