FSF - Fonterra Shareholders Fund

[LoungeLizard]

FY26 Q1 results were solid enough and Fonterra re-iterated its earnings range for continuing operations, post divestment, of 45-65c per share. Taking the mid-point of 70% of their 60-80% payout ratio and the 55c midpoint of earnings, then that's 38.5c per share, post divestment. If as expected the SP drops to say, $6, then that's good enough, in my view, to wait and see how the business develops.

Personally I think the pared-back business has a good chance of meeting or exceeding expectations, given that Fonterra will be more a more focussed entity  and the Ingredients Business has a higher return on assets than the soon-to-be divested consumer business ever managed. It all depends on Fonterra's ability to execute their strategy.
 
The ups and downs of milk prices aside, the dairy business is as about recession proof as any, so I'm happy to hold. That said, if the SP got close to $9 as we near payout date (some time away yet) then I'd be sorely tempted to cash up and eliminate the risk altogether. Another thought - Q2 results might also be out before payout date, so they could also provide some more data to aid decision making?

[Tim nice but dim]

"The ongoing dividend will therefor be reduced compared to the last 2 years. If the above points are shown in future FSF reports to be correct we should see the share price after the Mainland capital return reducing by more than $2/share."

Good summary but you didn't give a forecast for what you think future dividends will be and therefore yield based on SP

My post suggested FSF dividend will be highly correlated to WMPP, as this statistic has not been finalised for the 1/2 or full year you need to DYOR to determine EPS & DIV.

[LoungeLizard]

https://www.nzx.com/announcements/466421

[Habitz]

Capital return if approved will be paid in the first quarter of this year, plus 1H cash dividend (25 cents?) usually paid in April will be another nice top up

[Tim nice but dim]

time for another DIM dividend prediction from TIM

1) Fonterra Prediction 45-65 (continuing operations) c/share earnings, mid point = 55 cents
2) Add Mainland contribution
   From last AR EBIT was 397/1838 (total) = 21.6%
3) Adjust Total EPS for mainland = 0.55 * 1.216 = 0.66 cents/share 
4) Dividend policy + (mid point) 0.7 * 66 c = 46 cents
5) Adjust for Inital/Final split from last year = (22/57) * 46 cents =17.7 cents
6) Adjuct for change to WMPP price (last 6 months/last full year)
   =0.928 * 17.7 cents = 16.4 cents
7) Apply Rounding = 16 cents/share initial dividend


Well there is another DIM dividend prediction, the last one was within a cent.

[LoungeLizard]

Special meeting coming up on Thursday that hopefully should result in the $2 per unit return of capital being confirmed. Requires 75% approval but one assumes Fonterra have done their homework. 

[seaweed]

Special meeting coming up on Thursday that hopefully should result in the $2 per unit return of capital being confirmed. Requires 75% approval but one assumes Fonterra have done their homework. 

I did not vote. Vote closed on Tuesday? I was hoping to vote today.

[LoungeLizard]

I did not vote. Vote closed on Tuesday? I was hoping to vote today.

I don't think our votes will shift the dial much, Seaweed. Should be a formality in any event

[seaweed]

I don't think our votes will shift the dial much, Seaweed. Should be a formality in any event

Tried to vote on line but did not have my pin and password   ps my mistake. I was not meant to vote.

[Left Field]

Tried to vote on line but did not have my pin and password   ps my mistake. I was not meant to vote.

Shame, your vote would have taken the decision result to 100% approval 

[LoungeLizard]

Job done. Big payout coming unit holders way. What the SP will do after divestment is the $64k question. 

[Left Field]

What the SP will do after divestment is the $64k question. 

Latest FSF update https://www.nzx.com/announcements/467839

Much will depend on whether  FSF are following the 'under promise; over deliver' mantra.  Later in the year, a timely upgrade, or a healthy bonus dividend from the divestment of Mainland,  could do wonders for the SP post divestment. Today's update is nicely conservative IMO.

"Fonterra's FY26 forecast earnings guidance from continuing operations remains unchanged at 45-65 cents per share. It is intended that Fonterra's dividend policy will be applied to these continuing earnings.
 
 "Our interim dividend from continuing operations will be confirmed when we release our FY26 interim results and an update on the special Mainland dividend will be given at this time," says Mr Hurrell.


Interesting times.

[Habitz]

Mainlands underlying earnings will be paid as a special div, estimated at 14 to 18c for 7 months trading... not bad earnings for a business worth $2 to 2.50 per share. Gross up the half year and that's a high yield, up to 14 percent. But tell me where these numbers are wrong. I know fonterra receives about 4B and is paying out 3.2B. Is it fully tax paid div

Update this morning on mainland from Miles Hurrell
"As we close out our books for the first half of FY26 we can indicate that we expect to pay a special Mainland dividend in the range of 14-18 cents per share, which reflects the operating performance of the Mainland business during the first half of this year driven by ongoing cost management and favourable input commodity prices.�"

[LoungeLizard]

More good news! - special dividend of 14-18c. SP getting a boost on solid buying.

[Tim nice but dim]

More good news! - special dividend of 14-18c. SP getting a boost on solid buying.

WOW I didn't see this coming. This is a huge bonus to holders.

Quote from FSF release.

"We are currently finalising our interim accounts and can indicate that we expect the special Mainland dividend to be in the range of 14-18 cents per share, which reflects the operating performance of the Mainland business during the first half of this year driven by ongoing cost management and favourable input commodity prices."

If we look at Mainland dividend contribution from last year....

DIV = 57c/share
Mainland contribution = 21% or 12 c/ share
Adjust for dividend policy (80%) 12/0.8 = 15 c/share

This is for the full year & the special Div will be for perhaps 2/3 of the year (my assumtion of end march divestment date). So Mainland Group have significantly outperformed earnings  predictions this year. I would assume this will lead to further questions about the divestment from the doubters (non share holders).

On a side note the whole milk powder price has recovered well as stated by Big F.

https://www.globaldairytrade.info/en/product-results/whole-milk-powder/

Nothing but GOOD news today.