EU dairy co-ops to merge
Two European dairy co-operatives are set to merge and create a €14 billion business.
Rural trader Farmlands has finalised a new equity policy that offers shareholders guidance on future dividends.
The co-operative is looking at strengthening its balance sheet through retained earnings to ensure long-term sustainability.
Farmlands chair Rob Hewett told Rural News that they studied similar co-ops and their dividend modelling around the world.
He says Farmlands has adopted the policy used by co-ops in Denmark.
"We're very focused on reducing input prices and increasing value to our farmers and growers, as well as investing to strengthen Farmlands - with our strength matched by a strong balance sheet.
"We finalised an equity policy in September 2024 that offers shareholders guidance on the financial conditions under which Farmlands will consider paying a distribution to shareholders in the future.
"We know asking shareholders for more capital isn't the answer. Our strategy is to strengthen Farmlands' balance sheet through retained earnings."
As a co-op Farmlands has limited options to fund growth. These include borrowing, capital raising from shareholders and re-investing earnings back into the co-op.
Hewett says their goal is to retain profits to strengthen the balance sheet, enabling them to make future investments that benefit the business.
"The plan is to pay the banks first and reduce our debt. If our financial position is good, then we can look at a distribution to shareholders."
A low equity ratio means that the company primarily used debt to acquire assets, which is widely viewed as an indication of greater financial risk.
Farmlands is targeting an equity ratio above 30%. An equity ratio of 30-35% could lead to 25% distribution of profits to shareholders; a higher equity ratio would translate to a higher dividend.
"We fully expect to be profit-making again in the future and want to be responsible in the way that is distributed," says Hewett.
Farmlands recently announced a $14.3m net loss for 2024.
Hewett says that while disappointing as a result, despite a very hard year of effort at the co-operative, it's an annual result that's in line with a promise and strategy to deliver greater value to farmers and growers and to invest in strengthening the co-op itself, while also managing through a tough market environment.
The loss resulted from lower revenue (down $68.2m), reflecting farmer and grower spending, and was exacerbated by a one-off accounting adjustment to previously recognised tax losses of $12.3m. Farmlands says it provided more value back to customers through price and rebates throughout the year as well.
"If we remove the impact of the tax adjustments, our net loss would been $2m and slightly below the previous year," says Hewett.
"When you then consider that we have paid $92m in shareholder rebates, it demonstrates the underlying strength of the co-op and our ability to support farmers and growers through these tough times."
The government has announced a major restructuring of the country's seven crown research institutes (CRIs), which will see them merged into three public research organisations (PROs).
Hamish and Rachel Hammond jumped at the chance to put their university learning into practice by taking up a contract milking offer right after graduation.
"We couldn't do this without our team. They are integral to everything." That's the first thing that Te Awamutu dairy farmers Jayson and Stacey Thompson have to say about their team.
OPINION: The Canadian government's love affair with its lifestyle dairy farmers has got it into trouble once again.
Volatile input costs, fluctuating commodity prices, a reduction in direct payments and one of the wettest periods in decades that resulted in a disastrous harvest, have left their mark and many UK farming businesses worse off.
European milk processors are eyeing more cheese and milk powder exports into South America following a landmark trade agreement signed last month.
OPINION: The end-of-year booze-up at the posh Northern Club in Auckland must have been a beauty, as the legal 'elite'…
OPINION: It divides opinion, but the House has passed the first reading of the Gene Technology Bill.