Fonterra Shareholders’ Council: 2015 payout disappointing

Fonterra remains cautious about the way ahead, with chief executive Theo Spierings saying geopolitical turmoil the Middle East and Russian Federation, Ebola in Africa, an economic slowdown in China and the sharp drop in oil and mineral prices means that world markets are likely to be hard in the medium-term.

Net profit soared 183 per cent to $NZ506 million ($A451.75 million) in the 12 months ended July 31, while normalised earnings before interest and tax climbed 94 per cent to $NZ974 million, the company said in a statement.

“Fonterra’s CEO salary is in the top band of New Zealand CEO salaries, which is to be expected when you consider Fonterra is New Zealand’s largest and only truly global company with a $18.8 billion turnover in that reporting year”, he said.

The farmer-owned co-operative raised its forecast farmgate milk price for the 2015/16 season to $NZ4.60 per kilogram of milk solids from a decade-low $NZ3.85/kgMS. Pay-out levels need to be starting with a $6 number for farmers to be making money, he said.

The co-operative said on Monday it was shedding 750 staff, saving it a total of $100 million a year.

That’s why the interest-free loan Fonterra is offering its farmer shareholders doesn’t have to be repaid until the farmgate milk price or advance rate rises above the $6/kgMS mark. Whole milk powder has increased 44 per cent and Skim Milk Powder has jumped 21 per cent since July.

Fonterra announced this week that as a result of its business review it was making another 227 jobs redundant, resulting in savings of $103 million a year.

The New Zealand-based dairy producer said, “Last year we approaches Woolworths with a plan to build a state-of-the-art facility that would bring fresh innovation to fresh milk”.

Mr Coull said the Council is now reviewing the Co-op’s 2014/15 annual results figures as part of its monitoring role and will provide detailed analysis and commentary in its Annual Report to Farmers which will be available in early November. Debt to equity was just one measure and he was more focused on maintaining a stable credit rating for the cooperative which has an AA- rating (stable outlook) from Fitch and an A rating (credit watch with negative implications) from Standard & Poor’s, Paravacini said.

“The Board and management have given us an undertaking that they have a strategy in place to address this and the expectation from Council is that its implementation will give effect to the turnaround required”. “It still has the same strategic value”.