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…”
Fonterra chairman John Monaghan sought to cheer up the co-op’s farmer-shareholders by telling them at what was reported to be a “packed” annual meeting that “For a time this year, NZ farmers were paid this highest milk prices in the world.”
He insisted there has been a structural change in the co-op’s milk prices since Fonterra was formed.
“We’ve gone from being paid about half as much as our global peers to the point now where we are consistently paid the same or thereabouts.It sounds arrogant to say it, but the fact is that simply never would have happened without a strong Fonterra”. Continue reading “Fonterra must learn to be driven by profitability, not volume “
It’s a critical week for the country’s largest company, Fonterra, which has to find a new direction after shipping out its chief executive, Theo Spierings, writing off more than $1.5bn from its balance sheet, and posting its first loss in its 17-year history.
Meanwhile, back on the farm, Fonterra’s suppliers are absorbing payout downgrades as well as a slump in dairy farm prices. At the same time they are seeing the valuations of other companies in the dairy industry—notably A2 Milk and Synlait— soaring on the NZ sharemarket.
So they’ll be looking to Fonterra’s leaders for some fresh ideas on how to turnaround the fortunes of the big co-op. Continue reading “Why Fonterra’s farmers should be wondering what the Irish can teach us”
Fonterra is “humming” in China, according to a headline in the NZ Herald, although the text of the article beneath it mentioned the “woes” associated with the co-op’s investment in Beingmate.
The co-op is having to absorb an impairment of $405m on the value of its 18.8% holding in Beingmate. On top of the $183m payment it has had to make French giant Danone, the writedown takes the gloss off that otherwise “humming” performance.
Some of its farmer-shareholders may be looking over the fence to the rather different outcome for A2 Milk, which lifted its annual sales 68% in the June year, with revenue rising from $549m in the June 2017 year to $922m. During the latest year A2 Milk achieved gross margins up to 49%. Continue reading “Beingmate has muted Fonterra’s Chinese hum”