Govt will be hoping its R & D policies can spawn another ERoad

This is the year  of   delivery  by the  government  she leads,  Prime  Minister  Jacinda  Ardern has said –  the year     in  which   NZ    will be  transformed.

After   18   months  in office    there  have been precious   few  signs   of that  transformation  getting under way.     Even  one  of   Labour’s priorities — the provision of  affordable  housing — is lagging,  with  Housing   Minister Phil  Twyford at  risk of  making  himself a  laughing  stock.

Even less  of  a  laughing matter   is  the absence  of   any  green  shoots from  government-initiated programmes    in   lifting  the country’s  absymal rate  of  productivity. Continue reading “Govt will be hoping its R & D policies can spawn another ERoad”

Fonterra’s milk-price news is soured by chairman’s critique of the co-op’s earnings performance

At last a ray of sunlight into  the  country’s cowsheds:  giant  dairy co-op Fonterra has lifted its forecast farmgate  milk price  to $6.30-$6.60kg/MS, up from $6-$6.30, on the back of   strong  global  demand.

The good news extends to next season, with ANZ  economists  predicting – because dairy commodity prices are improving more quickly than expected – the  forecast for  2019-20   could go as  high  as  $7.30kg/MS.

And there is  something  else  Fonterra suppliers might get a  bit of  a glow from: the  recognition   by  Fonterra’s  top brass  that the  co-op  has not been  performing anywhere  near  where it should be.   They’ll  be looking for a   sharp improvement,  even  if  the  co-op has a long  way to go to  match  the   achievements of  smaller outfits   like  A2 Milk and Synlait. Continue reading “Fonterra’s milk-price news is soured by chairman’s critique of the co-op’s earnings performance”

Grass on the A2 side of the dairy fence is looking greener – and the profits plusher

The  contrasting   fortunes of  Fonterra  and  A2 Milk came into the  spotlight   this  week,  after the  latter  reported a  startling 55%  rise in  half-year net profit  to  $152m.  Fonterra  shareholders will be  ruefelly recalling  their  company’s  performance last year  when  it  reported its  first-ever  net  loss  of  $196m.

A2 Milk  shareholders  are  marching to a  very  different  tune.  Despite  one market  analyst  reckoning its shareprice had  become over-priced, buyers  pushed  it up  by  more than  a dollar to  $13.95  as they absorbed  news  of   strong sales growth in all key product segments – infant formula, liquid milk and milk powders.

Sales of infant formula totalled $495.5m for the half – a 45.3%  increase on the previous half, driven by share gains in China and Australia.

The company is accelerating its investment in building brand equity through enhanced marketing campaigns in its key markets of China, US and Australia, alongside continued investments in R&D and further development of its intellectual property. Continue reading “Grass on the A2 side of the dairy fence is looking greener – and the profits plusher”

Jacqui Dean has a lash at Nash over small business policy – but perhaps she should wait until August

She complains that small business owners are still waiting for the Small Business Council to do something for a sector struggling with rising costs and prescriptive labour law changes.

“It has been five months since the council was formed and after four meetings, including one in November, there has been no tangible improvements for small business.

“In fact, despite the council stating, almost eight weeks ago, that it would increase its focus on how it could “better support” small business, nothing has been forthcoming.” Continue reading “Jacqui Dean has a lash at Nash over small business policy – but perhaps she should wait until August”

Something festive for Fonterra farmers? A hint of solace would be a start…

Fonterra’s  suppliers will be choking on their  Xmas  rations, as they  digest the  price  blows  the co-op  has delivered.  First,  the dairy giant has  revised down  its  forecast milk payout  range  for the season to $6-$6.30 from the  earlier  $6.25-$6.50, and, second,  it is clawing back  some of the $4.15/kg  advance payment  rate.

Farmers  in  January will be paid  $4/kg for the  milk they supplied in  December plus the  co-op  is  clawing  back  15c/kg for all the  milk  supplied   between  June and November.

It  is  not   surprising that farmers   with  costs of  production  running   at  or above  $6/kg  are  reported to  be  “shocked”  and  “angry”.   Even those  efficient  operators   who have  lower  operating costs  won’t be happy  with   Fonterra  saying it  “appreciates”  the budgeting impact  the updated $4 advance rate will have on farmers in  January.     Continue reading “Something festive for Fonterra farmers? A hint of solace would be a start…”

Anti-competitive behaviour, a suggested political response and a lesson for the Nats

LONDON CORRESPONDENT:   When something appears in The Economist, it’s time to take it seriously.  So the appearance of a special report (‘An age of giants‘) suggesting that the businesses of the world are uniting and consumers are paying the price has generated a great deal of interest.

The Economist says that measures of industry concentration have been rising for a generation now, helping big businesses in some sectors to build anti-competitive ‘moats’ to fend off competition.  As a result, these sectors of the global (particularly US) economy have been earning excess profits. Worse, these trends are exacerbating inequality and fueling populist politics.  The Economist urges a triad of responses: opening and deregulating markets, freeing up intellectual property to hobble tech dominance, and more powerful regulators to check over-mighty firms.

It is an ambitious line of reasoning, one which certainly justifies checking alternative approaches.  Readers might compare the paper ‘Antitrust in a time of populism’ by Carl Shapiro of UCLA Berkeley.  This makes the case for a more measured approach:  is says firms can and should be attacked for specific anti-competitive conduct, but not just for dominance; and that existing tools are appropriate to achieve the necessary, more vigorous, merger enforcement. Continue reading “Anti-competitive behaviour, a suggested political response and a lesson for the Nats”

A tale of two milk companies – one of them is being suckled by taxpayers

The contrasting fortunes of Synlait Milk and Westland Milk Products were thrown into sharp relief last week. On the one hand Synlait won applause at its annual meeting from shareholders, impressed by its performance in virtually doubling profit ($74.6m against $39.4m) in its tenth year of operations. On the other hand Westland had the begging bowl out for a Provincial Growth Fund loan of $9.9m which will help the co-op in funding a $22m manufacturing plant aimed at converting milk to higher-value products.

The Westland dairy exporter, discussing a capital restructure in its 2018 annual report, said it had relatively high debt and limited financial flexibility.

Commenting on the PGF loan, chief financial officer Dorian Devers is reported as saying the co-op could have financed the project in other ways “but the terms we have been given from the PGF are more favourable. It’s a longer-term loan than we can get from a bank which is nice”.

The NZ Herald quoted economic consultant and former ANZ Bank chief economist Cameron Bagrie as saying the loan sets a “dangerous precedent”. He reckons it appears to be corporate welfare. Continue reading “A tale of two milk companies – one of them is being suckled by taxpayers”