November 12, 2018

Fonterra shareholders cautious of co-op's hope to improve financial performance
 

Fonterra's farmer-shareholders had expressed little patience with any more financial blunders on the New Zealand dairy co-operative's part, following the conclusion of its annual meeting.

As a recent independent report revealed that Fonterra has financially been performing poorly for its 17-year life, its chairman John Monaghan, in his first annual meeting, did not adequately addressed several issues, according to some shareholders.

Greg Gent, Fonterra's ex-deputy chairman and current shareholder, said the co-op's auditor PwC, which approved an investment in Chinese company Beingmate that fell apart, was "too close" in its ties with the co-op, NZ Herald reported. That fiasco prompted Gent to call for a maximum tenure for contractors like PwC, as he described the organisation's relationship with Fonterra as "dangerous" and claimed that PwC executives, as a result, can access a pathway to become the co-op's directors. 

In addition, in contrary to Monaghan's view that shareholders are feeling positive about Fonterra's future given that a strategic review of Fonterra's business and assets is ongoing, one shareholder flatly denied that sentiment, stating that farmers, as "tactical thinker," who want to "see the results, not just be told they are going to happen."

Meanwhile, 68% of voting shareholders turnout sparked changes within Fonterra's hierarchy, with sitting Ashley Waugh being ejected, and former director Leonie Guiney voted back in.

During Fonterra's annual meeting, it was disclosed that interim chief executive Miles Hurrell is paid "substantially less" than his predecessor Theo Spierings. The former also said that plans are in place to reverse the co-op's financial performance.

"Our ambition to achieve $35 billion in revenue from 30b liquid milk equivalents by 2025 has created confusion because it places too much emphasis on volume," Hurrell said, addressing Fonterra's now-abandoned goal of producing as much milk as possible.

"We are about creating value for our farmers, our unit-holders and for New Zealand."

Hurrell added that the co-op was focused on achieving earnings per share of 25-35 cents and cutting debt by $800 million this financial year. Capital expenditure had also been limited to $650 million for the current year - $211 million less than last year.

- NZ Herald