Editorial

Fonterra faces its headwinds

FONTERRA’S interim results signified steady progress on its changed strategy in the face of headwinds from higher dairy prices.

If Fonterra was still a pure farmers’ co-operative those headwinds would be powering the milk price and the threat to value-add margins, profitability, return on capital and share dividends could be downplayed.

Chief executive Miles Hurrell says the strategy can deliver what his predecessors were never able to achieve – good company results and a high milk price at the same time.

But 2021 financial year will be a game of two halves.

The interim earnings per share (eps) of 25c has already reached the bottom end of the full-year guidance range 25c to 35c.

Hurrell conceded it was possible that eps in the second half could be zero and the current guidance would be achieved.

He says Fonterra remained on track to deliver core financial targets of return on capital between 6% and 7% and a reduction in debt to a gearing ratio between 36% and 40%.

Not given to making extravagant promises, his moderate targets do seem attainable.

Talking of modest, the 5c interim dividend won’t make anyone’s fortune.

But the prospect of something two, three or even four times that at the end of the year has delivered some impetus to the conjoined unit and share prices.

Coincidentally, the FCG and FSF prices have risen 40% during the past year, while the Global Trade Dairy index has risen by the same proportion.

So, there is renewed investor and farmer confidence that Fonterra is back on the right track after its expensive foray into overseas milk pools and dairy farming in China.

The search goes on for a capital structure that might not have inherent opposing objectives and ensure capital adequacy, yet flexibility.

If acceptable returns on capital can be delivered at a time of high milk prices perhaps the current structure will stay.

Hugh Stringleman

LETTERS An opportunity for us to lead the world

WELL what a sad, cycloptic and dim-witted diatribe from Laura Henderson. That said, she is absolutely right. We produce just 0.2% of global emissions. The rest of her letter is total rubbish. But it is the question “so why should we do anything about it?” that really offends.

New Zealand is in fact a very high emitter when it comes to emissions per person. China is an extremely low emitter by the same yardstick. So Laura’s argument can extend to China. America has got more carbon sinks than most, so why should they do anything about it? Brazil has the biggest rainforest in the world, so why should they not mine a certain percentage of it each year, “cause you destroyed your rain forest years ago” and so on? And so homo sapiens sticks its dim, self-centred and arrogant little head in the sand and we all end up doing nothing at all. It is an appalling argument that will only end in a worldwide catastrophe of which the economy is merely a two-bit part player.

“This government ignores damage done by synthetics” she blithely goes on. Really? Who banned single-use plastic bags and what was the Nats response to that via Simon Bridges? “That won’t make any difference,” he dimly replied. And Laura assumes that if we go down the Labour and Green road there will be no farming at all. No. Farming is simply going to change. It is an opportunity for us to lead that change or simply get dragged backwards by it screaming and naked through the proverbial thorn bush.

Recently I learnt that an organisation called Orbital Assembly is going to launch the ultra-wealthy into space for a five-star holiday that is “out of this world”. I wonder how much it will cost the planet to launch one roll of super soft toilet paper to wipe their fat and entitled arses in space. The fattest of fat cats of the world queuing up to spend millions to pollute billions while arguing the old “it’s the economy” chestnut. I think if we go down Laura’s road of doing nothing, to put it in these words “good as gold and stupid as mud he’ll l carry on regardless” (lyric by the Beautiful South) then what is slowly and in exhaustively coming and gathering pace, then we will only deserve it.

Andrew Luddington

Lincoln

Letters to the Editor

Letters must be no more than 450 words and submitted on the condition The New Zealand Farmers Weekly has the right to, and license third parties to, reproduce in electronic form and communicate these letters. Letters may also be edited for space and legal reasons. Names, addresses and phone numbers must be included. Letters with pen names will generally not be considered for publication.

Farmers Weekly is published by GlobalHQ, PO Box 529, Feilding 4740. New Zealand Phone: 0800 85 25 80 Website: www.farmersweekly.co.nz EDITOR Bryan Gibson 06 323 1519

bryan.gibson@globalhq.co.nz EDITORIAL Carmelita Mentor-Fredericks 06 323 0769 editorial@globalhq.co.nz Neal Wallace 03 474 9240 neal.wallace@globalhq.co.nz Colin Williscroft 027 298 6127 colin.williscroft@globalhq.co.nz Annette Scott 021 908 400 annette.scott@globalhq.co.nz Hugh Stringleman 09 432 8594 hugh.stringleman@globalhq.co.nz Gerald Piddock 027 486 8346 gerald.piddock@globalhq.co.nz Richard Rennie 07 552 6176 richard.rennie@globalhq.co.nz Nigel Stirling 021 136 5570 nigel.g.stirling@gmail.com PUBLISHER Dean Williamson 027 323 9407 dean.williamson@globalhq.co.nz ADVERTISING Andy Whitson 027 626 2269 New Media & Business Development Lead andy.whitson@globalhq.co.nz Steve McLaren 027 205 1456 Auckland/Northland advertising steve.mclaren@globalhq.co.nz Jody Anderson 027 474 6094 Waikato/Bay of Plenty advertising jody.anderson@globalhq.co.nz Donna Hirst 027 474 6095 Lower North Island/international advertising donna.hirst@globalhq.co.nz Ernest Nieuwoudt 027 474 6091 South Island advertising ernest.nieuwoudt@globalhq.co.nz Clint Dunstan 027 474 6004 Real Estate & Farm Machinery advertising clint.dunstan@globalhq.co.nz ISSN 2463-6002 (Print) ISSN 2463-6010 (Online) Ella Holland 06 323 0761 Livestock advertising 027 602 4925 livestock@globalhq.co.nz Debbie Brown 06 323 0765 Classifi eds/Employment advertising classifi eds@globalhq.co.nz Grant Marshall 027 887 5568 AgriHQ Partnership Manager grant.marshall@globalhq.co.nz Andrea Mansfi eld 027 446 6002 Salesforce director andrea.mansfi eld@globalhq.co.nz Steph Holloway 06 323 0142 AgriHQ Commercial Leader steph.holloway@globalhq.co.nz PRODUCTION Lana Kieselbach 027 739 4295 production@globalhq.co.nz Advertising material adcopy@globalhq.co.nz SUBSCRIPTIONS 0800 85 25 80 subs@globalhq.co.nz Printed by Ovato NZ Ltd Delivered by Reach Media Ltd