Forget about following the floundering fortunes of Fonterra – a2 Milk is the NZX’s fast-rising star

New Zealand  eyes  have been so  focussed  this  week  on  an event  20,000kms distant   that they  might  not have  noticed here  at  home another  extraordinary  event, taking  place  on the  NZX.

The market capitalisation of a company  which listed   as recently  as  2012  on the local sharemarket soared  past the  $12bn  mark and is hard on the heels of  Meridian Energy,  which has the  highest   valuation  of  NZ-based companies on the NZX  at $12.3bn.

The  challenger is a2 Milk,  which sells a  specialised  type of  milk  with what  it claims are health benefits.

A2 has had  a  chequered  history  but  its  market  valuation  keeps  climbing,  racing  ahead   of  blue chips  like  Auckland International  Airport  and  Fisher  & Paykel  Healthcare  and  leaving  in its dust some one-time  market  darlings  like Fletcher  Buildings  (market cap  $4.3bn)  and   Spark  ($7.2bn). Continue reading “Forget about following the floundering fortunes of Fonterra – a2 Milk is the NZX’s fast-rising star”

Comforting news for dairy farmers as companies report results and the world price rises again

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”

Why Fonterra’s farmers should be wondering what the Irish can teach us

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”

The grass on the far side of the fence will look much greener for Fonterra farmers

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”

If we must come down from Peak Cow, let’s be careful about the regulatory path we take

“We’ve  kinda got to  what they might call ‘peak cow’” . That’s how  Primary Industries Minister  Damien  O’Connor  put it,  when  Corin  Dann interviewed  him  on  Q&A.  He  went  on:

“We’re  giving   clear signals that if growth is going to continue  it will be  growth and value from  what they do, not  just  getting  more   from the land, with the environmental   impacts of that”.

To some people, the phrase   ‘peak  cow’    sounds  like it comes from the  lexicology of the   Green   Party,    which  for   long  enough   cried  wolf   about   ‘peak oil’,  only  for  oil  producers  to  keep  the stuff  coming  out  of the ground in  ever-increasing  volumes. Continue reading “If we must come down from Peak Cow, let’s be careful about the regulatory path we take”