Fonterra’s board, under heavy fire for the losses racked up in the last two years, may at last be getting something right. Its recruitment of Mercury’s CEO Fraser Whineray to the newly created post of chief operating officer puts him in pole position to drive innovation, efficiency, and sustainability in the co-op.
When he joins Fonterra next year he will bring with him the credentials of having transformed Mercury, simplifying the business through the divestment of overseas interests and developing a compelling strategy for sustainable growth.
Harbour Asset Management’s Shane Solly said Whineray adds “a bit of grunt to the front row at Fonterra”.
In that context, Point of Order notes, Whineray would be following the example of his renowned uncle, the late Sir Wilson Whinerary, who not only captained the All Blacks from the front row, but subsequently had a successful career as a businessman and company director. Continue reading “Fraser Whineray: a results-oriented business leader with a track record on decarbonisation”
This is the second chapter in the woes of Fonterra, and behind it the dairy industry, on which the New Zealand economy is so dependent.
Point of Order listed some of those woes last week. Now, in the wake of the latest revelation, Fonterra will have to absorb a loss of between $590m and $675m for the current financial year.
Critics of the industry have sprung to the attack: Minister of Regional Economic Development Shane Jones is calling Fonterra’s management “corporate eunuchs” and labels Fonterra’s board as “grossly inept”.
Greenpeace has a simple solution: halve the dairy herd, a move that would cost the country $8.3bn in lost exports, and lower the standard of living of every New Zealander.
Jones’ ideas to resolve Fonterra’s financial difficulties are hardly more realistic.
Sacking the board won’t solve anything: nor trying to recruit a new executive team (though it might be worth asking Chris Luxon if he’d take a look). Continue reading “Farmers are getting more milk from each cow – they deserve a much better performance from Fonterra”
Encouraging signs emerged this week that key elements in the structure of NZ’s largest export industry are whipping themselves back into the shape they should be.
The giant co-op Fonterra has gone back into the black with a net profit of $80 million in the first half, after previously recording a net loss of $186m.
Meanwhile Westland Milk Products, NZ’s second biggest dairy co-op, is in line to be sold to China’s biggest dairy company, Yili, in a $588m transaction that would inject nearly half a million dollars into the operations of each of its suppliers.
Alongside these co-ops, the Canterbury-based Synlait has underlined its strength in the industry with a solid result in its half-year after achieving higher sales volumes. It reported a half-year net profit of $37.3m, 9.6% lower than the $41.3m in the previous first half, but with the focus on investing for growth, with a second processing plant due to come on stream for the 2019-20 season. Continue reading “Comforting news for dairy farmers as companies report results and the world price rises again”
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 must have felt like salt being rubbed into their financial wounds for Fonterra’s farmer-shareholders, when Synlait Milk this week reported its net profit soared 89% to $74.6m. Fonterra’s mob saw their co-op notch up a loss of $196m, and with prices at GDT auctions trending down, they may also have to accept a trim to the forecast milk price.
Where Fonterra talks of slimming its portfolio, Synlait is still investing in expansion.
In the latest year Synlait has been working on new and expanded plants in Dunsandel, Auckland and Pokeno as well as a research and development centre in Palmerston North. Continue reading “The grass on the far side of the fence will look much greener for Fonterra farmers”
Dairy farmers should be pleased with the advice liberally and freely tendered to Fonterra in the wake of the co-op’s board deciding to halt its international search for a new CEO and instead, with an interim CEO, Miles Hurrell, “pause and assess the way ahead”.
Fran O’Sullivan, Head of Business at NZME, which publishes the NZ Herald, says appointing an interim chief executive to run New Zealand’s largest company is an admission of failure that should force Fonterra’s board to look hard at its own performance. And she concludes:
“If this company is to succeed, it needs to be governed and led by grown-ups within a grown-up NZ commercial environment”.
Continue reading “Plenty of advice for Fonterra’s bosses – but are our expectations too high?”