3 M bovis hassles cut
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Vol 18 No 34, September 2, 2019
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Targets missed So will axe swing on Fonterra staff? Hugh Stringleman hugh.stringleman@globalhq.co.nz
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AIRY farmers and Fonterra unit investors must be prepared for more bad news from the co-operative on September 12 when the 2019 annual results are disclosed. The directors and the senior management team have not yet achieved the major targets set by then-interim chief executive Miles Hurrell a year ago. They were to reduce debt by $800 million, to reduce operating expenses to the level of 2017 and to achieve a return on capital of at least 7%. His nominated target date was July 31 this year for the debt reduction and July 31 next year for the opex cuts and ROC. After the massive $800m-plus write-downs announced two weeks ago and the advice by chief financial officer Marc Rivers that asset sales are still being negotiated the debt reduction has not been achieved on deadline. Despite a positive trading
result in 2019 the writedowns and a massive forecast reported loss between $590$675m, return on capital will be negative. At the annual results presentation Hurrell will reportedly announce large job cuts among Fonterra’s 22,000 employees to help meet the operating expenditure target. He will swing the axe in New Zealand and Australia, where the so-called home markets are haemorrhaging. Rivers re-valued the market shares, future earnings and brand goodwill and advised write-downs totalling $270m be announced immediately, instead of waiting for September 12. Despite consistently good farmgate milk prices for the past three seasons Fonterra has been unable to deliver earnings and dividends from its margins and value-add activities. A groundswell of farmer opinion favours the cooperative going back to NZ-only processing and exporting, at which it is among the most efficient dairy companies in the world.
MORE: WHAT OTHER FARMERS SAY P4-5
Look at yourselves Richard Rennie richard.rennie@globalhq.co.nz RICHARD Cookson, of Te Aroha, says Fonterra’s critics should take a back seat while the co-op resets itself. He also wants fellow shareholders to think harder about how much Fonterra reflects their own values and goals. “Really, concerns over dividend, milk price models and payments, these are secondary. “Where Fonterra needs to be heading goes far deeper and demands all shareholders take a good, hard look at who they are, what they have become and how much their co-operative reflects that,” Cookson, who runs five family cattle and goat farms, says. Any reset demands a cleansing of what he describes as a toxic culture at board level between farmer directors, something he believes is well under way under chairman John Monaghan. “And the best way he can go forward is by saying ‘this is on me’. He can be humble about the mistakes that have been made, apologise for how things have become what they are and go from there.” Cookson maintains most shareholders knew in their hearts the co-operative was going to get to this point and all, including himself, have to accept some responsibility for that happening
OWN UP: Farmers must take some responsibility for Fonterra’s problems, farmer Richard Cookson says.
rather than making it an us-andthem issue between farmers and management. “As a group we accepted performance was everything. That was our key KPI. So you cannot blame Theo Spierings for his bonuses. He was paid based on that KPI, that was what we valued.” That has left the co-operative bankrupt of social values that now need to be stocked up. “This will be hard for farmers to hear, that Fonterra reflects back on what we as farmers became. “There has been a level of
arrogance there in dairying as an industry.” He hopes any strategy revamp goes beyond dollars and cents and acknowledges the need for deeper co-operative values to be restored, where shareholders look out for one another and get to feel more integrated with their co-operative. “To have a better co-operative we need to stand up for values that I think have fallen away throughout our rural communities over the years when it comes to relationships and caring about each other.”
A NEW LOOK, A STRONGER FOCUS. It’s back to the future for us as we have re-branded away from Tru-Test Dairy Solutions back to what the market has known us as – DTS. As New Zealand’s leading milk cooling supplier and manufacturer of milk vats, we’re all about helping our customers grow through innovation. For smarter production and better rewards contact us www.dts.co.nz | 0800 500 387