‘Trading Among Farmers is flawed’

“And it has been proved to be that.”

And the cooperative also needs to be “less arrogant,” he told Dairy News. “I am not convinced that the cooperative’s farmer shareholders have to open the door to outside equity but clearly there is a need for more capital.

“TAF has been a huge distraction and it has produced no positive results. You had management running around trying to appease the expectations of unit investors when they should have been focusing on the needs of farmer shareholders.”

The co-op is under fire for its $860 million writedown of poorly performing assets. It has signalled a loss of $675m for 2019 and won’t pay any dividend.

Last week, the co-op added to the uncertainty and chaos by postponing its annual results announcement to the end of this month.

Fonterra is expected to announce a raft of cost cutting measures including job cuts.

O’Connor is not reading anything into this delay of the results and strategy outline. 

“Clearly Fonterra has some huge issues ahead. If delaying your results delivers a more open and transparent picture for farmer shareholders that should be welcomed. 

“Clearly they have had quite a messy situation to sort out and we have to trust that the new chief executive and the board, with a new strategic focus, can put the company back on a better footing.”

The cutting of bonuses and pay rises is a “fair and sensible move at a time when the performance of the company is under scrutiny, and clearly management have had a role to play in that”.

“I think while prices are steady and should be seen in a positive light, the capital structure and operations of Fonterra itself need to be improved.

“None of its problems relate to being a co-op, it is simply the quality of governance and management that have overseen the company for the last 10 years.”

O’Connor “absolutely” is watching the situation closely. 

“Right from its formation I have been very mindful. This is the biggest and most important company in our country. It is essential that governance and management are as good as they can be.

“International dairy is a challenging environment. It is full of politics and disruption but it has to be open to all information. The company has to be less arrogant in its dealings with everyone from top to bottom.”

In hindsight, he says, the shareholders council has also been “less than effective”.