Fonterra has announced an unchanged pay-out forecast of $4.70 per kgMS - a level below farmer expectations, chairman John Wilson says.

Given the results achieved in the first half of the year and the continued volatility in international prices, the co-operative was holding its forecast Farmgate Milk Price.

Fonterra's pay-out forecast of $4.70 is unchanged.

'However, our forecast dividend has been lowered to 20-30 cents per share,” says John, 'resulting in a forecast cash payout of $4.90 - $5.00. The board has declared a 10 cent interim dividend.

'These half-year results are below our farmers' expectations, in a period when the Farmgate Milk Price is low and we are reducing the forecast dividend range.”

CEO Theo Spierings says the first half of the year has been subdued for the co-operative due to high volatility and challenging global market conditions, resulting in a 14 per cent decrease in revenue.

The precautionary recall last year when it was feared milk powder might be contaminated with botulism, coupled with the recent 1080 contamination threat, have been unwelcome distractions.

'These events remind us that the world is constantly changing and we have to be agile and responsive so we can remain ahead,” says Theo.

'We have the building blocks in place to deliver on our vision and strategy for the long term.”

John says the current milk supply forecast for the 2014/15 season has increased to 1,551 million kgMS - two per cent below the 2013/14 season.

'Oversupply from dairy producing regions around the world in the early months of the financial year saw the trade-weighted GlobalDairyTrade price index hit a five-year low in December,” adds John.

'Supply outweighed demand and buyers undervalued milk, which was reflected in prices that declined to unsustainable levels.

'Lower commodity prices placed downward pressure on our Farmgate Milk Price in the first half. This was partially offset by currency, with a benefit of approximately 30 cents per kgMS to the forecast Farmgate Milk Price, as at January 31.

'Volatility continues to influence international dairy commodity prices, and given this, we recommend caution with regards to on-farm budgets.”

Net profit after tax is down 16 per cent to $183 million. Normalised EBIT is also down seven per cent to $376 million, compared with the same period last year.