Time to put things right at Fonterra

“It was certainly disappointing and the size of the loss was surprising,” McGiven told Dairy News.

“But the ball is now firmly in the directors’ and senior management’s court as to how they review/revise the strategy to reverse this result.

“The key to this will be an improved communication and PR strategy towards shareholders and suppliers to ensure there is improved confidence from the grassroots so that milk supply is guaranteed.”

McGiven says while the $196 million net loss was “exacerbated by the Danone payout and the Beingmate writedown,” it’s not a good look for the co-op.

At its results announcement, chairman John Monaghan said the co-op is being clear with farmers and unitholders on what it will take to achieve the forecast earnings guidance.

“For the first time we are sharing some business unit specific forecasts. Among others, these see the ingredients and consumer and foodservice businesses achieving an EBIT of between $850 million and $950 million, and between $540 million and $590 million, respectively.

Lifting the performance of the co-op is a key priority for FY19, Monaghan said.

“We are taking a close look at the cooperative’s current portfolio and direction to see where change is needed to do things faster, reduce costs and deliver higher returns on our capital investments.

“[We will assess] all investments, major assets and partnerships against our strategy and target return on capital,” Monaghan says.