What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
In a move that echoes Fonterra's controversial policy, the Alliance Group is paying vendors 60 days from the end of the month of the invoice. Fonterra drew widespread criticism for a similar policy.
A vendor invoicing the co-op this week will have to wait 60 days from the end of this month for payment- almost 90 days after sending the invoice.
Federated Farmers South Canterbury Meat and Fibre chairman and Alliance supplier Miles Anderson says "a large number" of shareholders have expressed their disappointment to the board and management at farmer meetings.
"We feel that companies who do this are essentially using their trade suppliers as a bank," he told Rural News.
"It's not necessarily illegal but we feel it's not ethical."
Alliance general manager strategy Nigel Jones says last year it advised vendors about the change in payment terms, after a review of internal operating processes.
"Payment is now made a net 60 days from the end of the month of the invoice," he told Rural News.
"Previously, we had a myriad of payment terms in place and the standardisation was part of a wider programme to improve Alliance Group's operations.
"These changes sought to bring our goods and services suppliers closer into alignment with our own cash cycle. We pay for stock, incur the costs of processing, but don't receive revenue from our customers for months.
"We gave this matter a great deal of thought and were careful to provide sufficient notice of the change to allow any businesses to adjust their own business practices."
However, transport companies, ferrying livestock from farms to processing plants, raised their concerns directly with farmers.
Anderson says farmers have sympathy for transport companies.
"We feel they operate on pretty low margins; they have their staff and stuff to pay for."
"It's not a good look for our co-op; we, farmers work on paying our contractors on the 20th of each month and there's no reason why our co-op shouldn't do the same."
Anderson says farmers were under the impression that the policy was under review after they raised the issue with directors.
He says the co-op's board and management have implemented a range of great measures to control costs. However, the extended payment term hasn't gone down well with shareholders.
Alliance says the change did not affect farmers who provide livestock to the company.
It also denied suggestions that it plans to enter into an exclusive contract with any one transport operator to carry farmers' livestock.
