Fonterra woke its members up to a multi-million dollar hit from its restructuring as it unveiled that their shares were worth 13% less than fair value, and that it would hold back at least one-third of profits.

The New Zealand co-operative, the world's biggest dairy exporter, said that the value of their shares was being kept at NZ$4.52, even though fair value had risen to NZ$5.10, as it unveiled the impact of the first stage of its shift into a fresh capital structure.

The NZ$0.58 discount, being introduced to reflect the illiquidity of Fonterra's 1.25bn shares, equates to more than NZ$700m (US$500m).

It also said while it expected NZ$0.30-0.45 per share in distributable profit, it would pay out only NZ$0.20-0.30 per share in dividends, with the balance – worth more than NZ$180m at NZ$0.15 a share – being retained to strengthen the balance sheet.

Fonterra last month won members' approval for its new structure, which replaces a format which saw the co-operative paying out huge amounts from its reserves in poor years and left the group with uncomfortable debts.

Farmers' market 

The group warned member to expect a further discounting of their shares, adding that the price was being held at NZ$4.52 from last year as part of a transitioning process.

The shares would now be worth probably NZ$3.83 if discounted fully to reflect the fact that they are not freely traded. On stock markets, illiquid shares are shunned by many investors because positions cannot be easily acquired or disposed.

Discounting to that level would knock more than NZ$800m more from the value of Fonterra shares.

However, the co-operative said that the next stage planned for its reforms, allowing farmers to trade shares between themselves, would "potentially have an impact" on the discount level.

Grant Thornton, the accountancy firm brought in to undertake the Fonterra valuations, "had signalled it may reconsider the discount level as and when more details are known".