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FARMERS WEEKLY – farmersweekly.co.nz – July 26, 2021
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Feedback multiplies capital options Hugh Stringleman hugh.stringleman@globalhq.co.nz FONTERRA’S capital restructure consultation has drawn out many alternative proposals and feedback from farmers has already modified the company’s preferred option, introducing more farmer flexibility. The minimum shareholding part of the revised proposal has changed from 25% of milk supply to 33%, in other words a share standard change from 1:1 at present to 1:3. The board is also open to enabling sharemilkers and contract milkers to hold shares if the co-operative moves permanently to a farmer-only share market. Retiring or exiting farmers may also have up to 10 or 15 years to sell down their shares, instead of three years currently. New suppliers may also have up to six years to share up. In two areas the restructuring proposal remains unchanged: a maximum shareholding 4x milk supply and voting rights to stay linked to share-backed supply. The company will provide more information on business strategy and future performance to help farmers’ views on capital structure. “In August and September, we will provide further information on our long-term strategy including the types of activities
WIDE RANGING: Fonterra chair Peter McBride says farmers’ views during the consultation so far had been varied and heartfelt.
we will invest in, the returns we are targeting, and the measures against which we will track our progress,” the company said. Fonterra chair Peter McBride says farmers’ views during the consultation so far had been varied and heartfelt. “While we seek to cater for diversity it is impossible to incorporate every piece of feedback,” McBride said. “We need to be pragmatic and open to compromise in order to find a way forward together that is in our best long-term interests.” Fonterra is now reviewing the
role of a market-maker in the supply shares and the fund units and how potential buy-back options might support liquidity in a farmer-only market. Consultation themes have been consolidated and published under the heading of alternative farmer proposals and the company has provided responses. Unshared milk supply and the possible return of share capital are two linked themes. Buy-backs would reduce the total shares on issue and an equitable mechanism for distributing unshared supply
would be needed. “Unshared supply would be a separate and potentially significant group of stakeholders,” the company said. McBride says unshared supply is available as a tool within the current constitution but there are limitations. It would need to be available to all and the Commerce Commission and the Dairy Industry Restructuring Act would apply. He says unshared supply in a big way would be unsustainable. Chief financial officer Marc Rivers was asked to comment on the strength of the balance sheet and the priorities for share capital. Rivers says share capital of the co-operative had not moved significantly as the number of supply shares had remained constant. Deleveraging of Fonterra’s balance sheet was proceeding nicely after the sale of its China farms and the Beingmate stake. More remained to sell to get to a debt-to-earnings ratio of 2.5-3. “At that level we have an ability to withstand the inevitable shocks, to go after business opportunities, offer support to our farmers or provide a market maker, for example,” Rivers said. “But the real determination is earnings and the returns we generate from our various businesses. “There are many ways capital
can be applied in a business like this. “Where is the best return on capital – do you return it if you don’t have a better use for it?” To summarise, McBride says consultation had again shown farmer ownership and control are paramount and that moves towards more flexibility also seem to need a farmer-only share market.
Do you return capital if you don’t have a better use for it? Marc Rivers Fonterra Alternative structures suggested by farmers, like nominal shareholding and a twocompany model, have been again dismissed. Over the next two months Fonterra will conduct surveys and have focus groups to ask farmers specific questions and test different aspects of the potential changes. A more detailed proposal should be ready for release around the time of the annual results in late September. “We are still aiming at a farmer vote at our annual meeting in December,” McBride said.
Ospri extends movement reporting deadlines Kevin Forward says Ospri wants to support farmers and communities. “We understand those impacted people will have a lot to deal with at present, whether it be land or property and the recovery will be long-term,” Forward said. “Ospri wants to help lessen the load by giving people a bit of breathing room during this distressing
and uncertain period.” As a result of the extended times the following conditions apply: - Register as a PICA (people in charge of animals) within seven days after the local state of emergency ends. - Declare all animal movements within seven days after the local state of emergency ends. - Animals that arrive
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untagged must be tagged and registered in Nait within seven days after the local state of emergency ends. - Declare animal deaths and losses within 21 days after the local state of emergency ends. Given the importance of animal traceability and biosecurity, Ospri is advising farmers to still tag and register their animals before moving.
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Anyone who needs help with domestic or lifestyle animals should contact Renwick (Blenheim) SPCA on (03) 572 9156, or Westport SPCA on (03) 789 7520. For commercial farm assistance call MPI on 0800 00 83 33. Those who need emergency feed, help moving stock or cleaning up, can call Federated Farmers freephone 0800 376 646, option 2 or the Rural Support Trust on 0800 787 254. If you require more information about tagging and registering your animals over this period, go to https://www. ospri.co.nz/farmers-and-livestock-owners/help-with-tags-andtagging/
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OSPRI is extending its timeframes for reporting livestock movements under the National Identification and Tracing (Nait) scheme in areas under a state of emergency after recent flooding. The extensions will remain in place until state of emergency declarations are lifted in the Buller and Marlborough districts. Ospri head of traceability
