increase font size
Waikato farmer Andrew McGiven says $1b capital return for Fonterra shareholders in 2024 from asset sales will be a good move.
Fonterra's plan to return $1 billion to shareholders in three years through the divestments of overseas milk pools is the right move, according to Waikato farmer Andrew McGiven.
While the co-operative has used proceeds from previous divestments to reduce debt, this is the first time it has signalled a return of capital to shareholders.
The co-op didn’t return any capital to shareholders after the sale of its ill-fated China Farms. Over the years, the co-op invested close to $1 billion dollars in the Chinese farms – with little or no returns for farmer shareholders.
McGiven believes that after the experience with China Farms, most shareholders and milk suppliers will back the sale of the remaining overseas milk pools.
Fonterra believes it has an opportunity to differentiate New Zealand milk further on the world stage, with the aim of getting more value from the co-op’s milk.
As a result, it is reviewing ownership its Chilean and Australian businesses where it still collects and processes milk.
McGiven, a former Waikato Federated Farmers president, told Dairy News that selling assets and returning most of the proceeds to shareholders is the right thing to do “if those plants pose a risk of becoming a burden on the balance sheet”.
“Since those assets have been paid for over time by the suppliers, then that is where the sales proceeds should go.”
He says focusing on NZ milk is a no-brainer.
“Especially now that we have with a static milk pool and increasing competition for milk from new processors,” he says.
“Fonterra can better monitor the quality of the product and better secure the supply chain so that potential milk contamination issues can’t occur and also better oversee costs.”
Chief executive Miles Hurrell says as the co-op looks out to 2030, the fundamentals of dairy – in particular, New Zealand dairy – look strong.
“Put simply, the world wants what we’ve got – sustainably produced, high-quality, nutritious milk,” he says.
“This comes at a time when we see total milk supply in New Zealand as likely to decline, and flat at best. On one hand, this requires the right capital structure to help ensure we don’t lose the benefits of what generations of farmers have built – a New Zealand dairy cooperative of scale.
“But on the other hand, it gives us more options to be selective about what we do with our coop’s milk. In doing so, we can increase the value we generate for farmers and New Zealand over the next decade.
“To make this happen we have made three strategic choices – continue to focus on New Zealand milk, be a leader in sustainability and be a leader in dairy innovation and science.”
Fonterra also plans to boost its annual R&D investment by over 50% to around $160 million per annum in 2030.
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
Kiwis love their butter, and that's great because New Zealand produces some of the best butter in the world. But when the price of butter goes up, it's tough for some, particularly when many other grocery staples have also gone up and the heat goes on co-operative Fonterra, the country's main butter maker. Here the co-op explains why butter prices are so high right now.
An A$2 billion bid for Fonterra's Oceania business would be great news, according to Forsyth Barr senior analyst, equities, Matt Montgomerie.
The world's largest dairy company may be in pole position to acquire Fonterra's Australian assets.
Over 85% of Fonterra farmer suppliers will be eligible for customer funding up to $1,500 for solutions designed to drive on-farm efficiency gains and reduce emissions intensity.
Fresh produce grower and exporter T&G Global has overturned last year’s dismal performance by reporting a half year net profit of $1.7 million.
One of New Zealand’s largest fertiliser plants could be forced to shut down for four months as uncertainty looms over gas supply.
Federated Farmers North Canterbury president Bex Green says two public meetings held this week should have made it loud and clear that rural families and businesses are concerned about proposed staffing changes at NZ Police.
The Environmental Protection Authority (EPA) is consulting on a proposal to ban weedkillers containing chlorthal-dimethyl (DCPA).
August 6 marks Farm Worker Appreciation Day, a moment to recognise the dedication and hard mahi of dairy farm workers across Aotearoa - and DairyNZ is taking the opportunity to celebrate the skilled teams working on its two research farms.
OPINION: The Government has been seeking industry feedback on its proposed amendments to a range of Resource Management Act (RMA) national direction instruments.
OPINION: Sydney has a $12 million milk disposal problem.
OPINION: Canterbury milk processor Synlait's recovery seems to have hit another snag.
