Expert Says Fonterra Backing Current Strategy With New CEO Appointment
The appointment of Richard Allen as Fonterra's new chief executive signals execution, not strategy, according to agribusiness expert Dr Nic Lees.
The announced support package in the form of an interest free loan of 50c/kgMS for production between June and December will help farmers get through the tough times ahead.
While Fonterra farmers were expecting a drop in the forecast milk price (down $ 1.40/kgMS to $ 3.85) it does not make today's announcement any easier to bear. The dividend forecast of 40 - 50 cents per share lifts the total available for payout to $4.25 - $ 4.35/kgMs. The retention policy means that the forecast cash payout for the season would be in the range of $ 4.15-$ 4.20 for a fully shared up farmer.
Coull: "Most Farmers are facing a payout lower than their cost of production, some for the second year in a row. With this latest forecast, the support package will be critical to many and is a clear benefit of being a Fonterra shareholder.
"Fonterra's total payout is based on the Milk Price and the dividend from its value added business and while the Milk Price is largely out of Fonterra's control, with external factors negatively impacting global commodity prices, Farmers are relying on Fonterra to take advantage of this low cost of goods situation and deliver a strong dividend return.
"Whilst farmers will appreciate the support package announced, it is absolutely critical that in seasons like this where the Milk Price is down that our co-op's strengths come to the fore and farmers receive the full benefits of Fonterra's integrated cooperative model (which pays profits back to Farmer Shareholders) for a higher total payout.
"Board, management and the Shareholders' Council have all stated that Fonterra's performance needs to improve and it's important that the strategy, including the velocity programme, delivers tangible benefits for Shareholders especially in times of low milk price."
Coull says farmers are under immense pressure and the next 12 months will be extremely tough for all.
"It is early days in the season and there is a chance for improvement in the milk price but all farmers can do is focus on controlling what we can control on-farm and keep doing what we are good at."
