Friday, 01 November 2019 15:22

Shareholders lament Fonterra performance

Written by  Staff Reporters
Fonterra Shareholders Council's annual report. Fonterra Shareholders Council's annual report.

Fonterra Shareholders have delivered a scathing report on the co-op’s 2018-19 financial year performance.

The Fonterra Shareholders Council annual report notes that co-op has performed poorly against targets set by the board.

The co-op failed to meet six out of seven key performance indicator (KPI) targets on its strategy: only meeting the milk collection target of 80.8% of total NZ production.

It fell short of its consumer and foodservice sales volume: achieving only 4.9b liquid milk equivalent (LME) against a target of 5.7b LMEs. 

Farmgate milk for 2018-19 was $6.35/kgMS, 65c less that the $7 target. Return on capital was 5.8%, against target of 7.6%.

Fonterra’s gearing ratio last year was 48.2%, well outside the preferred range of 40 to 45%.

The council says the KPIs need refreshing to reflect the new strategy and the measures of success that have been announced.

“Council is also of the view that, given it reflects the aspirations for the co-op for the financial year ahead, the statement of intentions should be transparent to all stakeholders throughout the financial year that it relates to, as opposed to reflection following the end of that financial year. 

“We will continue to push for these outcomes in dialogue with the board.”

Council outgoing chairman Duncan Coull says shareholders lament another year of disappointing financial performance from the co-op. 

“We should be in a positive space right now with a solid spring in most places, a milk price that is looking very favourable and interest rates at historic lows. 

“There is good cause for optimism, yet the sentiment in the farmer base is more pessimistic.”

The co-op has some real challenges ahead, he says.

This includes a changing regulatory environment and tightening of banking covenants. 

“We also have challenges within our cooperative as it looks to fundamentally reset its behaviours and strategic direction, to align with its new purpose to ensure it delivers on the promise of an enduring co-op for us all. 

“Our mindset will determine our approach - we can choose to see challenges or opportunities. 

“It is my personal view that, as a dairy industry, we’re at risk of being caught up in our own negativity, to the extent that we risk missing out on the opportunities that are in front of us as innovators and producers of the most sustainable dairy nutrition in the world. 

“The decisions made over the course of this year have been defining in terms of establishing the groundwork for a new way forward for our co-op. 

“Unfortunately, the full fruits of that groundwork are yet to materialise into satisfactory financial results, but I firmly believe we have started to lay solid foundations to continue building on.”

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter