Editorial: Punching Above Our Weight
OPINION: With 10,500 dairy farms, New Zealand continues to punch above its weight around the world.
The co-operative has signalled April 14 as the date for paying a $2/share capital return to shareholders and unit holders.
Fonterra is returning $3.2 billion to shareholders and unit holders with farmer shareholders receiving an average of $400,000 each.
The windfall comes on the back of a $9.50/kgMS forecast milk price for the season. Fonterra has also signalled a special Mainland dividend to be in the range of 14-18 cents per share.
This dividend reflects earnings of the Mainland Group before its sale to Lactalis for $4.22 billion. The sale is now unconditional.
Fonterra Co-operative Council chair John Stevenson told Dairy News that with a solid forecast milk price, projected strong earnings and a capital return it is a goot time to be a Fonterra farmer.
He says councillors are seeing this positive sentiment reflected in their discussions with farmers.
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"That said, most farmers have been around long enough to be wary of the negative impact that international volatility and commodity cycles can have," he says.
The council backed the sale of the Mainland Group to Lactalis, which includes iconic brands like Anchor, Mainland and Kapiti in New Zealand.
Fonterra is also pulling out of Australia where it will offload brands like Western Star Butter and Perfect Italiano to Lactalis.
Stevenson says the council is comfortable that the sale process offered many opportunities for Fonterra farmers to meet with Fonterra to discuss and question the divestment proposal.
"There was strong engagement from farmers in this process, and council was pleased with the quality of the information provided to farmers for consideration - including the council commissioned report from Northington Partners.
"Given the magnitude of the decision, council believed it was important to see a strong mandate from Fonterra farmers for the sale, and the quality of the process delivered that."
Early Days
John Stevenson says Fonterra farmers have been pleased to see the recent turnaround in Global Dairy Trade (GDT) auction results.
But he adds that it is over six months until their final milk price announced in September so there is still room for volatility.
Looking forward, he says the council's focus is on ensuring that Fonterra delivers on what it has promised farmers in the divestment process.
"This includes monitoring Fonterra's performance in the B2B environment post divestment of the Consumer and associated businesses.
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Fonterra is also pulling out of Australia where it will offload brands like Western Star Butter and Perfect Italiano to Lactalis. |
"Council and farmers will be keen to see Fonterra maintain the consistent strong performance that we have been seeing in the last couple of years."
Many Options
The $3.2 billion capital return provides farmer shareholders with options, says Co-operative Council chair John Stevenson.
"From our discussions councillors have heard that there is a broad range of plans around how it will be used," he told Dairy News.
"Farms can be generational assets, so reinvestment into on-farm improvements is high on the list for some.
"Other examples are further debt repayment, expansion into additional farms, investment outside of the farm gate, and personal discretionary spending.
"Council has also heard that the capital return will be used to enable some farm succession plans."
The cash injection will also benefit the rural community, he adds.
"Benefits from the capital return will be enjoyed not only by shareholders but the broader rural communities we live and work in."
