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New leaders at the helm: Fonterra chairman John Monaghan (left) and chief executive Miles Hurrell.
Fonterra chief executive Miles Hurrell is asking shareholders for time to turn the business around.
Hurrell, confirmed last week as chief executive after six months in an interim role, believes his appointment is the start of a new era for the co-op.
He acknowledges that farmer shareholders and unitholders are looking for a change in direction: “Something we have to move on very quickly, in my mind,” Hurrell told Dairy News.
“We need to do things differently… but it’s a large organisation with businesses and footprints all over the world. Changing direction does take time.”
Hurrell says he is humbled by the support from farmer shareholders since his appointment.
“I thank farmers for messages of support and I look forward to working with them as we go about getting this business back to where it needs to be.”
Fonterra last year posted a historic first annual net loss of $196 million.
Last month it said it would pay a higher milk price to its suppliers but revised its forecast earnings down to 15-25c/ share.
Fonterra’s share price slumped to $4.20/share after the announcement; it had been hovering around $6.60/share at the beginning of last year. Following Hurrell’s confirmation as chief executive last week, the share price rose to $4.41/share.
Hurrell says the earnings guidance is disappointing and suggests “we need to do things fundamentally different from way we have”.
Fonterra’s management is working with the board on a new strategic direction. An update is expected when Fonterra announces its interim results next week.
“We will give a flavor of those changes on March 20 but it will take time to work through those things,” he says.
Fonterra aims to reduce debt by $800m by the end of the financial year; three major assets -- investment in Chinese company Beingmate, the Tip Top Ice Cream business in NZ and a third unnamed business -- form part of this.
The co-op has unwound its joint venture in Australia with Beingmate and has taken back control of its Darnum plant in Victoria.
Hurrell says it is talking to several parties about Tip Top.
He says the co-op will talk about the third business when it presents interim results on March 20.
But he says it was important for the co-op to get its strategy right before moving on assets.
Turning Fonterra around will take time — Hurrell
In a follow-up to this old mutt’s piece two issues ago about Fonterra directors getting to grips with the co-op’s financial state and loudly sharing their dismay in the Koru club, another of the Hound’s spies has passed on more news in the ‘Fonterra director watch’ category.
Fonterra says there’s an urgent need to improve return on capital invested in the co-op by farmers and unit holders.
Fonterra has taken a $126 million hit over the sale of its stake in Venezuelan consumer joint venture, Corporacion Inlaca.
Fonterra is pulling out of a European joint venture as part of its portfolio review following last year’s disastrous financial results.
Fonterra says it has returned to profitability with a net profit of $80m for the first half of the 2019 financial year.
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