Fonterra's new management team gives hope

He hopes that changes heralded by the new management team signal the start of “some green shoots” for the co-op.

“As a Fonterra farmer I am happy to see that they have posted a net profit and I am happy with some of the rhetoric from board and management about the consolidation of the business,” he told Dairy News.

“While we are a long way away from a satisfactory financial position with dividends needed to be retained, it’s positive to see a solid milk price and I am hoping that this is the start of some green shoots for the Fonterra business.”

The co-op last week posted a net profit of $80 million for the half year ending January 31, 2019.

While the co-op’s normalised earnings before tax are down 29% on last year to $323m, the return to profitability provides some good news for Fonterra’s 10,000 farmer shareholders.

Last year, the co-op posted an annual loss of $196m, the first such result in its 17-year history.

However, Fonterra farmers are making it clear that more work is needed to improve the co-op’s performance.

Fonterra Shareholders Council chairman Duncan Coull made no mention of the $80m net profit in his media statement.

Instead, he said the council acknowledges management’s view that fundamental change is needed to improve Fonterra’s performance.

“Fonterra’s farmer shareholders will agree that the results announced are not where they should be,” says Coull.

The council is backing board and management’s initiative to thoroughly review strategy. 

“A well defined and executed strategy focused on our farmers’ milk is critical to maintaining sustainable returns and an enduring cooperative for generations to come.”

He noted that solid progress has been made on reducing operating and capital expenditure, and on the asset sales required to meet the debt reduction target. 

“Our co-op has challenges ahead of it in parts of our business in Australia, South America and China, where we need to see significantly improved margins to meet the earnings guidance,” says Coull.