Fonterra Lifts Forecast Payout

For Immediate Release
16 February 2005

Fonterra Lifts Forecast Payout

Fonterra Co-operative Group has announced a 20 cent increase in forecast payout for 2004/05 to $4.50 per kg of milk solids.

Chairman Henry van der Heyden said the increase reflects continued strong market demand supporting record high commodity prices. "We've now contracted with our customers a much higher proportion of our sales for this season, compared to when we last revised forecast payout in December. We're more confident now about our full-season earnings - hence this revision."

Mr van der Heyden still expects payout for 2005/06 to be lower than 2004/05.

"We've been cautioning shareholders for some time to expect a lower payout for next season. Our reasons for caution haven't changed.

"Commodity prices are at record levels, but they can't remain there indefinitely. Also, despite our foreign exchange hedging policy, our hedged conversion rate against the US dollar will be lower, which will hit our NZ-dollar earnings harder than this season."

The higher advance rate will take effect from March 2005.

Month Payout Forecast Advance Rate
June 04 $3.85 kg/MS $2.70 July 04 - October 04
$2.80 Nov 04 - February 05
October 04 $4.05 kg/MS $2.90 Nov 04 - February 05
December 04 $4.30 kg/MS $3.00 January 05 - February 05
February 05 $4.50 kg/MS $3.00 January 05 - February 05
$3.35 March 05
$3.55 April 05

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