What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
He says over the last 12 months Fonterra has improved its cashflow, reduced debt and removed significant cost from within the business.
However, he admits there is still more to do.
‘The business units that are at the heart of our new strategy are delivering for us and we look forward to discussing our new strategy and our performance with our owners in September.
“It’s important that we now implement our new strategy and deliver value back to them,” says Monaghan.
Fonterra is signalling a full-year loss of up to $675 million for year ending July 2019. Last year, the co-op posted its first ever loss of $196m.
The co-op has also decided not to pay a dividend this year, on the back of $860m write-down in asset value.
Monaghan said that in-light of the significant write-downs that reflect important accounting adjustments Fonterra needed to make, the board had brought forward its decision on the full year dividend for FY19.
“We have made the call not to pay a dividend for FY19. Our owners’ livelihoods were front of mind when making this decision and we are well aware of the challenging environment farmers are operating in at the moment.
“Ultimately, we are charged with acting in the best long-term interests of the co-op. The underlying performance of the business is in-line with the latest earnings guidance, but we cannot ignore the reported loss of $590 - $675 million once you look at the overall picture.
“Not paying a dividend for the FY19 financial year is part of our stated intention to reduce the co-op’s debt, which is in everybody’s long-term interests.”
