Fonterra Suppliers Confident in Mainland Dairy Future
Fonterra's 460 milk suppliers in Australia, who will switch to Lactalis end of this month, are unfazed with the impending change.
He told the co-operative’s annual general meeting in Methven today that there’s a misconception that Fonterra is active in the market to boost its share price.
“Following the transition to the flexible shareholding structure, we implemented market maker arrangements to support liquidity in the Fonterra Shareholders’ Market,” says McBride.
“We also have the ability to buy back shares as part of our ongoing capital management programme, where we see it as value accretive to the co-op.”
Fonterra's share price has been having a rollercoaster ride in recent years. Five years ago, the co-op's share price was around $5.40/share. Today, it’s valued at $2.16/share.
Fonterra farmers need to buy shares before they can supply milk. Farmers who bought their shares at around $5-$6 each five years ago have seen their value halved. Earlier this year, the co-op also announced a $50 million share buyback scheme.
McBride acknowledged that the share price has come down.
He says this was anticipated and well-signalled before shareholders voted to support the changes to its capital structure.
“There has also been a share price impact because of the recent capital return.
“Over time we expect that the price will reflect the co-op’s financial performance, and the value farmers see in that. Ultimately, farmers will determine the value of the shares.”
McBride says flexible shareholding is the right capital structure for the co-op.
It has been in place since March and is “working broadly as expected”, he adds.
“By making it easier for farmers to join, or stay with, the co-op, it will help us to maintain a sustainable milk supply here in New Zealand, where milk volumes are declining.”
