Assailing corporate leadership helps lift Jones up the political leadership ladder

Shane Jones tears strips off Fonterra and says the chairman should ‘catch the next cab out of town’”.    

It’s   another  headline to propel the NZ First Cabinet minister up the  political  leaderboard.   Maybe  he’s  learning from  Donald Trump.

Jones’  latest outburst  follows  an  earlier  broadside  against  another  iconic  NZ   company,  Air NZ,  suggesting its chairman step down and its CEO  stay out of politics.

Is there   some connection between  the two  onslaughts?  Could Jones have heard the speculation that Air NZ CEO Christopher Luxon may be  on the short list to replace  Fonterra’s Theo Spierings (who announced earlier this year he is   standing down  as  CEO   after seven years in the job)?

Jones  does not  shrink  from the role of   being  NZ  First’s attack dog.  What better  way  to  keep your party  (and yourself) in the news?

But this under-estimates Jones as a politician.  He is much smarter than that.

He  sees his mission not just as being the champion of  regional  NZ.  He believes,  as  his  leader  does,   the  neo-liberal  policies  followed  by successive governments  have deepened  divisions and  inequalities in  NZ  society.

He points to too much neglect in the provinces by corporates.  Auckland-based head offices  have devoted more of their energy to boosting their salaries and  not  enough to  the basic  interests  of  the  people  who they  should be serving.

As Stuff reports, Jones weighed into Fonterra saying –

“I’ve been bloody disappointed that Fonterra, in my view, their leadership have not accepted there’s been a new government and there’s a new narrative, and I’ve had a gutsful of them believing they’re bigger than what their writ really is.

“I’m worried about the absolute absence of accountability for the enormous amounts of dough that the current Fonterra chairman has presided over”.

He wants the company to “focus less on interfering in politics and more on justifying the money they’ve lost overseas”.

I believe that they have become disconnected from the farming community and I said in front of Mr John Wilson that I have requested the Minister of Agriculture – when he looks at his dairy restructuring – identify the issues and whether or not it’s time for us to look at a restructuring of Fonterra.  The leadership of Fonterra I believe, starting with the chairman, is full of their own importance and have become disconnected.

Wilson was tight-lipped over his own future as chairman.  By the end of next month he will have been on the board for four terms and chairman for two.

Primary  Industries  Minister  Damien  O’Connor defended his NZ First colleague  and pointed  out  that Fonterra is  being reviewed as  required under the legislation through which it  was set  up.

The  giant   dairy co-op  is perhaps NZ’s  only truly multinational  company.  It employs about 20,000 people and earns about 15% of the country’s export income.

From that income the co-op pays $10bn annually to farmers, its shareholders, for the never-fail collection of 17b litres of perishable milk.

In recent years Fonterra has picked up,  processed and sold the resulting dairy products effectively and without fuss. Its well-publicised failures – the buttermilk lake near Taupo, the wastewater overload at Hawera and the botulism scare at Hautapu – occurred at the 2013 peak. That was the season when farmers produced 8% more milk than the year before. Later seasons have produced lower volumes.

Because of a slow-down in the expansion of the NZ dairy industry and loss of some suppliers to competing processors, Fonterra now has 10% more processing capacity than it needed at the peak of spring milk production for the past two years. The overcapacity has led to fears of stranded assets and costly overheads, which the company strongly denies.

O’Connor  has  recently  been  talking   about the need for  more  value-add  by the industry.  But it has  been one of  Fonterra’s achievements since Spierings stepped into  the  top job to lift performance in food service and advanced ingredients.

Food service products – cooking creams, cream cheese, mozzarella and cheese slices – now account for 11% of Fonterra’s 23 billion litres of milk equivalent (LMEs), about $2b of revenue. The volume grew 27% in FY2017 and the gross margin was 27%.

Fonterra’s problem child is its investment in Beingmate, the Chinese infant formula company. Not only has Fonterra been forced to impair two-thirds of a $700m investment and book a 19% share of repeated trading losses, but much of its lost NZ milk market share has gone to start-up Chinese processors, backed and facilitated by the Chinese government.

Just as the Sanlu investment was former Fonterra chief executive Andrew Ferrier’s biggest failure, Beingmate looms over the exit of Spierings and his former chief financial officer, Lukas Paravicini. The directors must accept some blame for the Beingmate investment approval and its outcome.

Wilson will face the shareholders later this year, when his term expires, should he choose to stand again.

All he will say at present is that the transition to a new chief executive needs to be accomplished before he considers his own future.

 

 

 

 

 

 

 

 

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