Fonterra could learn lessons in enterprise and growth from Australia’s Wesfarmers

NZ  co-ops have been  getting  a  bad  media  rap   lately.  Take  Fonterra, for example.  Andrea Fox, one of the  country’s  best-informed journalists  specialising  in agriculture  issues,  started   a  new series in the  NZ  Herald  with the  headline:  “Fonterra: Disappointment and soured  dairy dreams”.

Noting   the dairy goliath had a silver-spoon  birth   nearly  18 years ago she  wrote:

Today the  co-operative  is looking a bit like  the family’s overweight, lazy teenager  hogging the remote  on the biggest couch in the room And the  credit card bills are coming in”.

After Fonterra posted a historic first net loss of $196m, Fox  says  calls  are heating up  for  the company to be split up  and a  company, perhaps  listed, spun off it, open to outside capital  investment to  chase  high-value product  markets. One of the country’s investment  gurus, Brian Gaynor, says even major shareholders  are telling him it’s  time for  change.

What   Fonterra   needs, as   Point of Order sees it, is  something of the spirit that   has made Wesfarmers one of  the great, thrusting businesses in  Australia.

The Perth-based conglomerate  started off as a farmers’ cooperative in  1914  and  is  now  one of Australia’s largest employers, with  a shareholder base of about 490,000.  Some New Zealanders might know it  as  the  owner of  Bunnings  or  Kmart.

This week Wesfarmers was on a  new  path,  launching  a $A776m  takeover bid   for  lithium  miner  Kidman Resources whose major asset is a 50% stake in a lithium project in Mount Holland, Western Australia, consisting of an under-construction mine and a lithium hydroxide refinery in Kwinana in Perth.

Lithium is an important component in the batteries used in electric vehicles, and Wesfarmers said it wanted exposure to the growing demand for that resource driven by the rising uptake of electric cars around the world.

The offer announced on Thursday morning, which comes hot on the heels of Wesfarmers’ $1.5 bn bid for rare earths miner Lynas, has won the backing of Kidman’s board and its joint-venture partner.

Wesfarmers chief executive, Rob Scott, says the company’s bid for Kidman Resources is not a replacement for its failed $1.5 billion tilt at rare earths miner Lynas.

We see Kidman and Lynas as two very independent opportunities, separate opportunities and we’ll consider each separately. Our initial work analysing opportunities in the lithium space goes back many years”.

No wonder  Bill English,  when he  finished  as  Prime Minister  in NZ,  leapt at the chance of  joining   the board of  Wesfarmers. The rewards of being engaged in such an exciting business  – we may supposed – are very  satisfying.


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