Fonterra has raised about $270 million from its farmer shareholders but won't know until the end of the year how much of that money is to go towards buying extra "dry shares" in the co-operative.
Farmers voted in favour of allowing themselves to take up an extra 20 per cent in the co-operative in November as part of a three-stage capital restructure of the business.
Fonterra needs more capital to address the risk to its balance sheet of its farmers cashing in their redeemable shares, and to fund global and domestic growth ambitions.
Yesterday it said 3461 of its 10,500 farmers had subscribed for extra shares at a price of $4.52, bringing in a total injection of $270.7 million.
At the same time 59 farmers surrendered 1.6 million shares worth $7.3 million in response to less milk production.
Fonterra chairman Henry van der Heyden said from a starting point he was pleased with the result but did not have any prior expectations of the take-up.
"We just didn't know, cashflow is still tight and some areas are under drought conditions.
"It's quite a bit of cash to come into the co-operative."
Van der Heyden said the money would be used to reduce debt levels.
"We have got a lot of pressure on the business to reduce the gearing ratio," he said.
Last year it was up as high as 61 per cent and Van der Heyden said Fonterra hoped to drop it to between 45 and 50 per cent.
But he did not rule out using it for acquisitions.
"If one or two opportunities come along around the ability for profitable growth, we would also look at that."
But the co-operative won't know until later in the year how much money is new money and how much has been paid in to cover extra production.
Farmers must buy one Fonterra share for every kilogram of milksolids they produce.
Van der Heyden said it would depend on what happened between now and the end of the year as to how much money would be allocated to extra shares.
Milk production was up in parts of the South Island this year but has been hammered in the far North where farmers are battling with drought conditions.
Van der Heyden said production in Northland was down between 13 and 15 per cent daily on last year, while the Waikato and South Auckland region was down between 2 and 3 per cent.
It's only two years since farmers faced the last drought.
Van der Heyden said it was worse this time for Northland farmers but not so bad for those in the Waikato and Hauraki region.
The next stage of Fonterra's recapitalisation is to convince farmers to trade the shares among themselves.
But Van der Heyden said it was still a long way off that.
"We are just at the start of the process."
Fonterra still had to reach an agreement with the shareholders' council and would hold a meeting with the council soon to discuss that.
Farmers will have a second chance to buy dry shares at the end of May.
Fonterra's farmers inject $270m
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