Wednesday, 18 November 2020 06:55

Investors shedding Fonterra units

Written by  Sudesh Kissun
Fonterra Shareholders Fund chairman John Shewan (left) and former agriculture minister Nathan Guy. Fonterra Shareholders Fund chairman John Shewan (left) and former agriculture minister Nathan Guy.

Fonterra's unit trading scheme continued to bleed investors in the financial year ending July 2020.

 

Total institution holdings in Fonterra Shareholders Fund (FSF) declined from 15% to 13% and private wealth dropped from 7% to 5%.

There was also a reduction in offshore investors; New Zealanders now make up 86% of total investors, up 3% from last year. The number of Australian investors dipped 3%.

FSF chairman John Shewan says as Fonterra’s performance continues to improve, it will regain investor confidence. He says the FSF would like to see institutional and private wealth holdings grow.

Shewan says Fonterra’s two years of consecutive losses in 2017-18 and 2018-19 eroded investor confidence. Speaking at the fund’s annual meeting in Auckland last week, he noted that at the start of the 2020 financial year the unit price dipped into the low $3 territory.

This occurred mid-August 2019 as Fonterra advised the market there was going to be a number of write-downs, with an expected loss of $590-$675 million for the previous year.

The unit price recovered in late September 2019 when the co-operative announced the sale of its 50% share in DFE Pharma as part of a strategy review.

Shewan says during the last financial year the unit price broadly followed the NZX50 index, however, it held better than some other listed companies during Covid lockdowns.

The fund finished the financial year, August 1 2019 to July 31 2020, up 8% at $4.06/share, from $3.77 – slightly up relative to the NZX50 index, which had growth of 7% for the same period.

The unit price earlier this month stood at $4.40, an increase of 17% since the start of the 2020 financial year and an increase of 29% on the low point of $3.41 in mid-May.

The fund allows investors to invest in the performance of Fonterra by buying units, giving them economic rights only and no access to Fonterra shares.

 For 12 months ending October 30, units on issue jumped 4 million to 106 million units on issue. 

During the 12-month period, units issued peaked at 107 million units on issue at mid October 2020.

Shewan noted the increase was predominantly due to farmer share compliance activity.

When a farmer ceases to supply milk to Fonterra, they have three years to reduce their holding in Fonterra shares.

He says in recent times a number of ceased farmers, instead of exiting Fonterra completely, have opted to sell their shares and buy units simultaneously – effectively transferring their Fonterra shares to units.

“There is a significant portion of retired farmers that no longer supply Fonterra milk who are classified as retail holders in the fund, and it is this group who made up a notable portion of the 4% point increase in retail holdings this year.”

More like this

No fooling around

OPINION: The non-performing China Farms have always been a source of headaches for Fonterra.

China farms finally sold

After years of losses, Fonterra's two wholly owned China farming hubs in Ying and Yutian have been sold.

More grass, more milk

Fonterra collected more milk in February thanks to better pasture growth in most parts of the country.

Tanker drivers roped in for fundraiser

Fonterra's Pahiatua and Longburn based tanker operators have proven the benefits of pulling together - quite literally - by hauling their trucks by hand for charity.

National

Machinery & Products

SIAFD wins punters' plaudits

After celebrating its 70th year last month, it looks like the South Island Agricultural Field Days (SIAFD) has hit its…

Opens up blindspots

Traditionally blind spots caused by large buckets or front mounted loads on wheeled loaders have been a major safety concern.

She's one big feeder

Feeder specialists Hustler has released a maxi-sized multi-feeder aimed at large scale farms in New Zealand and further afield.

Roots out problems

Austrian manufacturer Pöttinger has introduced the new Durastar narrow share for its Synkro and Synkro-T, mounted stubble cultivators.

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Blue murder

OPINION: Your old mate recently read an off-the-wall suggestion, by some boffin, that deliberately staining meat blue will lead to…

Foot in mouth - again!

OPINION: This old mutt reckons Agriculture Minister Damien O'Connor too often suffers from 'foot in mouth' disease.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter