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”
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”
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”
National’s Small Business spokesperson, Jacqui Dean, is obviously intent on keeping the government on its toes on matters within her sphere of responsibility.
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”
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…”
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”
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”