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Strong Credit Rating Affirms Sound Financial Profile

Fonterra Co-operative Group has welcomed the release of Fitch Ratings' updated rating report on the Group.

The credit rating agency, one of the world's three leading agencies, maintains a long term rating for Fonterra of "AA-" and a short-term rating of "F1+", with a stable outlook. Fitch's previous report on Fonterra was released last April.

Fonterra chief executive Craig Norgate said the updated report confirmed the Group's financial strength and positive growth prospects.

"The report confirms we're financially sound and well placed to implement our growth strategy.

Additionally, given the number of credit rating downgrades globally, this is a very pleasing result."

The rating places Fonterra on a par with other Fitch-rated entities such as Telstra, ANZ and Westpac.

Fitch said Fonterra's credit rating was underpinned by two key considerations:

The highly efficient nature of the New Zealand dairy industry (Fonterra accounts for 96% of New Zealand's milk production)

The financial flexibility inherent in Fonterra's method of paying shareholder suppliers, whereby about 30% of the estimated final payout is withheld until the start of the new season.

Fitch said in its report that one of the key factors in Fonterra's success has been its position as one of the lowest cost dairy producers in the world together with the stability and reliability of its supply to world markets: while other exporters are in and out of the global market, depending on the over- or under-supply in their home markets, Fonterra has built up a reputation for reliability over the years.

Fitch also welcomed Fonterra's strategy of backing its downstream consumer goods businesses into joint ventures with strategic partners who can contribute their own products, distribution networks and capital.

Fitch identified the most important of these international strategic alliances as the formation of Dairy Partners America, a 50/50 joint venture with Nestle SA.

Fitch Ratings is one of the three leading rating agencies in the world, along with Moody's and Standard & Poor's, and was formed in June 2000 from the merger of New York and London based Fitch IBCA and Chicago's Duff & Phelps.

Standard & Poor's in October 2002 reaffirmed its long-term rating of "AA-" and short-term rating of "A-1+" (with stable outlook) for Fonterra, matching its previous rating from October 2001.




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