Fitch: No Rating Impact On Fonterra From Increase In Advance Rate

Thu Mar 28, 2013 1:04am EDT

(The following statement was released by the rating agency) SYDNEY, March 28 (Fitch) Fitch Ratings said New Zealand-based Fonterra Co-Operative Group Limited's (Fonterra; AA/Stable) announcement yesterday of an increase in its advance rate to farmers is strategically sound and it improves the company's security of supply. Fonterra has confirmed that the increase in the advance rate payment (partial payment to farmers for milk supplied to Fonterra) is a temporary measure to support farmers through the recent drought. The higher advance rate is within Fitch's forward looking assumption of a 10% subordination of payments to New Zealand farmer suppliers. The increase in the advance rate does not have a material impact on Fonterra's annual cash flows or leverage. Fonterra is effectively compensated for the incremental cost of higher working capital associated with the increase in the advance rate through the Milk Price (the price paid by Fonterra to its farmers). Fonterra's actions will secure its milk collection volumes for the 2014 milk year by assisting farmers in maintaining and growing their dairy herds. Contacts: Primary Analyst Johann Kenny, CFA Director +61 2 8256 0348 Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney, NSW 2000 Secondary Analyst Vicky Melbourne Senior Director +61 2 8256 0325 Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: iselle.gonzalez@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. Fitch Australia Pty Ltd holds an Australian financial services licence (AFS licence no. 337123) which authorises it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

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