(The following statement was released by the rating agency)
SYDNEY, March 28 (Fitch) Fitch Ratings said New Zealand-based
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 to farmers for milk supplied to Fonterra) is a temporary
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
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
Johann Kenny, CFA
+61 2 8256 0348
Fitch Australia Pty Ltd. Level 15, 77 King Street, Sydney, NSW
+61 2 8256 0325
Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326,
Additional information is available at www.fitchratings.com.
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