Three step process for Fonterra’s restructuring

September 18, 2009

Fonterra has announced a three step capital restructuring process:

 1. Strengthening the Share Structure. Farmers would be allowed to hold shares up to 120% of their milk production (for most farmers, the current limit is closer to 100%) and there would be enhanced incentives for them to hold shares even if their production falls. The rules about the pricing of end of season share transactions would also be tidied up.

 2. Restricted Share Value. The way Fonterra shares are valued would be adjusted to reflect that share ownership is restricted to farmers only. As this would likely result in a lower share value, there would be a transition process to deal with any impact on the share price.

 3. Trading Among Farmers. Fonterra would move to a system where farmers buy and sell shares among themselves, rather then transacting through the Co-operative.

Opposition from farmers to a public listing has restricted options for the company. This plan retains farmer control but also depends on farmer funding at a time when dairy farm debt is high and the payout lower than it’s been in the last two seasons.

Fonterra Chairman Sir Henry van der Heyden said :

“The options we are discussing with farmers would strengthen the capital structure and make Fonterra more adaptable and competitive in the international marketplace. They seek to encourage farmers to maintain or increase their equity in the Co-operative.”

. . . He said the key to improving Fonterra’s capital structure was reducing and eventually eliminating redemption risk. Redemption risk occurs because Fonterra’s share levels are related to milk production and the Co-operative is responsible for buying shares back off farmers when they want to redeem them. After milk production fell during the 2007/08 drought, for example, Fonterra had to pay out $742 million of equity to farmers via redemptions.

“To be successful and achieve the best possible payout for farmers, Fonterra can’t afford to have hundreds of millions of dollars washing in and out of the balance sheet every time milk production fluctuates, for whatever reason,” Sir Henry commented.

“We need certainty in our equity base to invest in dairy processing operations so as to drive a higher payout. These investments require capital and are long-term commitments – the stainless steel of a new processing plant, for instance, has a useful life of more than 30 years.”

Sir Henry said the success of the suggested capital structure changes would ultimately depend on how much additional capital farmer shareholders were prepared to commit to their Co-operative. It was difficult to estimate how much new equity might be raised from farmers, but the Board believed it should be enough to fund Fonterra’s needs for about the next five years.

 Shareholders will be consulted on the options which will be put to a vote. They will require 75% support before the co-operative can proceed with the changes.


A Five Day Cow

September 18, 2009

This was sent to my farmer with no indication of who wrote it so I can’t give any credit to its creator.

A Five Day Cow

I long for a cow of modern make

That milks five days for leisure’s sake;

That sleeps on Saturday and rests on Sunday,

To start again afresh on Monday.

 

Oh! For a herd beyond suggestion

Of staggers, bloat or indigestion;

That never bothers to excite us

With chills or fever or mastitis.

 

I sigh for a new and better breed

That takes less grooming and less feed;

That has the reason, will and wisdom

To use a seat and flushing system.

 

I pray each weekend long and clear,

Less work to do from year to year;

And cows that reach production peak

All in a five-day working week.

 

Oh why don’t the scientific bods,

Firmly entrenched in their cushy jobs,

Show these ignorant breeders how

To propagate a five-day cow?


Click goes the keyboard

September 18, 2009

Jamie Mckay is running a competition with a prize of a $1500 broadband package from Farmside on the Farming Show.

Last week’s winner was South Otago farmer, poet and singer Ross Agnew.

As the Farming Show’s North Otago correspondent, I’m not eligible to compete, but penned an ode to the internet for my contribution to Jamie’s show this week.

In doing so I’ve taken a bit of poetic licence and ignored Paul L’s facts which got in the way of the good story about pigeon post beating email.

Alone in his office the grumpy farmer sits,

Trying to get his mind round megabytes and bits.

The computer is chugging out the things he needs to know

But the internet is hopeless when it goes so jolly slow.

 

Click goes the key board, click, click, click,

They say it’s the way to make the business process slick.

That’s okay in town where broadband makes it fast,

Out here in the country we’re dialling up the past.

 

The farmer prods the key board and peers closer at the screen

Only half a message though half an hour it’s been.

Ten emails are coming, the message brightly flashes

But attachments are so slow the system often crashes.

 

Click goes the key board click, click, click,

If the computer was a tractor it would get a hefty kick

The farmer knows the internet should keep him up to date

But with dial up the messages always come in late.

 

Invoices could be sent and bills all swiftly paid

If only transmission wasn’t frustratingly delayed.

Killing sheets and milk reports should easily be downloaded

But minutes turn to hours as patience is eroded.

 

Click goes the key board, click, click, click.

The computer age is on us but rural internet is sick.

The tyranny of distance means we need the service most

But email is still slower than old fashioned pigeon post.


Did you see the one about . . .

September 18, 2009

True justice and murder sentencing at Stephen Franks

Ralston addicted to blogging at Cactus Kate – on what’s missing from modern journalism.

What’s a hendecagon? at Something Should Go Here – a handy chart for figuring out which figure is which.

Spring forward: my garden year starts here  by Claire Browning at Pundit.

For confused Beltway types at NZ Conservative – Andrei compares pollution in China and NZ.


Do they wish they’d never met?

September 18, 2009

The aftermath of a partnership which promised much but ends in tears is never easy, for people or businesses.

Sometimes the people involved wish they’d never met. I suspect that’s the way PGG Wrightson and Silver Fern Farms feel after their attempt at partnership fell through.

PGW had to pay up when the deal fell through and it also lost business from farmers who were more than unimpressed with what had been planned.

SFF came away with a $30 million cash settlement and $10 million in PGW shares, at least some of which it’s now intending to sell.

SFF has been trying to raise money from shareholders but a week ago only about a third had indicated any interest. That offer closes today and the plan to sell its PGW shares indicates the take up is well below what’s needed.


Drunken sex no advertisement for Denmark

September 18, 2009

Ever wondered what happens to the kids who don’t understand what’s acceptable among mates might not be in other contexts?

At least one of them grew up and went into advertising in Denmark where s/he came up with the idea for an advertisement to attract tourists.

Picture if you will, the scene as s/he pitches the idea:

“Um, well we could like, y’ know ah do a video with a blonde chick and a baby. And like y’know she could tell how she met this bloke in a pub and he’d be a like tourist and she’d be a like y’know local and y’know they like had sex and he like did a runner and then she like, well, found out she was pregnant and like y’know had a baby and she can’t remember the father’s name or where he came from and now she’s like trying to find him”

That doesn’ say come to Denmark for the scenery or the culture to me, but the client, VisitDenmark, bought the idea, filmed it and posted it on YouTube.

The Danes who saw it were furious that people were being tempted to tour their country by the story of a one-night stand and the clip was withdrawn from YouTube. But it was too late because, as these things do, it had been copied several times.

Hat Tip: ODT


No crying over this spilled milk

September 18, 2009

Farmers can’t turn the milk off at the cow but they can stop it getting to market and that’s what they’ve done in at least eight European countries.

Anger at low prices has spurred farmers to spill their milk. They’ve poured it down drains and spread it over fields and blocked roads with tractors.

Phil Clarke has the story here and more pictures here.


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