The Single Economic Market: do the governments in Canberra and Wellington really want to advance the agenda?

Although the governments in Canberra and Wellington declare they are both committed to advancing the Single Economic Market (SEM) agenda, building on the success of the Closer Economic Relations (CER) Trade Agreement, the recent meeting of the respective trade ministers in Auckland didn’t produce much more than an array of platitudes, and certainly left business lobbies on both sides of the Tasman yawning.

A Tale of Two Ports

Port of Tauranga has cracked the $100M net profit mark for the first time, underlining how efficient it has become as NZ’s largest port. The NZX-listed Mount Maunganui-based company also reported this week its long-term credit rating had been elevated from ‘BBB+’ to ‘A-‘ by credit rating agency Standard & Poors. The short-term rating was affirmed at ‘A-2’.

PoT’s market capitalisation hit $4.3bn in the wake of its latest result, a huge leap from the $78m at the time of its IPO in 1992. The company has provided a river of gold for the Bay of Plenty Regional Council, which retains 56% of the shares.

So why have other local bodies, which own ports, been so slow to follow the example of the BOP Council in partially privatising their port businesses and reaping the rewards?

Testing times for NZ’s dairy industry: Can its leaders find the right formula?

Dairy giant Fonterra has taken a hammering in the media in the wake of its disclosure it expects to report a full-year loss of as much as $675m and won’t pay a dividend as it slashes the value of global assets. It will be the second annual loss in a row.

Investment guru Brian Gaynor in the NZ Herald argued Fonterra’s farmers have drained the co-op almost dry in terms of milk prices and dividends and have left it in an extremely vulnerable position. Earlier another Herald columnist, Matthew Hooton, contended NZ has put all its milk in one pail – in a company with inadequate governance and capital to match its aspirations.

NZ First is not alone in worrying at the implications of a Westland Milk sale to Yili

Is   Westland  Milk   one of  NZ’s  “key  strategic assets”?

NZ  First  is adamant  it is and believes the government  should be a  applying a  “national interest test”   to the proposed  sale of the company  to the Chinese  dairy giant Yili.

Those  who  see  heavily indebted  companies  like Westland Milk struggling to  make a profit and  not  even  matching  Fonterra’s payout  to its suppliers might take a  cooler view  to  the proposed  sale.

Federated Farmers dairy chairman Chris Lewis said he had received “mixed” feedback from West Coast farmers on the deal, which will require 75% approval.

Businesses seem gloomy but health-sector companies are in good heart

The PM, Jacinda Ardern, received what her handlers would have perceived  as  unexpected  criticism  from the  media   after   she gave  a pre-budget speech to an Auckland business  audience.  One of those  in the  audience  was   said to  have   described   it  as  an   “ideological fairytale”;  others   apparently  were  disappointed   it had  “nothing for business”.   

Given   she  did list  as   two of the five priorities  in the budget as   being “creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy; and supporting a thriving nation in the digital age through innovation, social and economic opportunities”,  the criticism itself  could be  regarded as  a    bit  “ideological”.

Surely   business  doesn’t  expect   government hand-outs,  even if  it  is labeled  a  “well-being”  budget?

But  there   seems  little   doubt    that   the   mood of  business  is downhearted   these  days.

Or is it  really? 

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.

Yili bid for Westland Milk raises questions about dairy co-operatives – and Fonterra’s ownership

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On  the face  of  it, it’s  a  no-brainer.  Weighed  down  with  debt,  Westland  Milk,  based in   Hokitika  is financially  on  its  knees.  Riding  to  its  rescue,  Chinese  dairy  giant  Yili  has come in with a  $588m buyout deal   which  will yield  $3.41  a share   to the co-op’s  farmer shareholders,  and, as well,   absorb  Westland’s debt and liabilities.

According to  Westland, the  nominal value of its shares  has ranged  from  70c  to $1.50  per share. For the  average-sized  Westland farm, the  share offer translates to  about half a  million dollars cash.

The offer  looks even  more attractive since  Westland had to  cut its  milk payout  forecast, while other  companies’ forecasts  are rising.  Westland, which has  grown out of  the West  Coast’s  150-year  dairy heritage, hasn’t paid  a  competitive milk price   for  several years.

The conditional  deal comes with extra  sweeteners. Yili has committed to collect all  milk  supply. It  will  also pay  a  competitive  price of at  least  as  much as  the  Fonterra  farmgate milk price   for  10  years.

But why  would   Yili   go that distance?