Kingi SmilerAgribusiness person of year

02/11/2013

Prominent Maori businessman Kingi Smiler, responsible for some breakthrough developments in Maori agri-business, has been named Agribusiness Person of the Year by Federated Farmers.

He joins an elite list that includes Dr John Penno (Synlait), Sir Graeme Harrison (ANZCO), Andrew Ferrier (Fonterra) and Craig Hickson (Progressive Meats).

Kingi’s greatest accomplishment to date, beyond completing 20 Ironman events and achieving an international age-group ranking, was to pull together the support base and drive the establishment of Miraka Limited, the largest collaborative new venture undertaken in the Maori agrarian sector, indeed the entire Maori economy over the past five years.

Miraka’s state-of-the-art milk powder production facility, which draws on geothermal energy, is based at Mokai northwest of Taupo. It cost $90 million to build and opened in 2011, achieving profitability in year one.

Kingi is chair of the Board of Miraka, and is also chair of Wairarapa Moana Incorporation, who with Tuaropaki Trust are the cornerstone shareholders of Miraka. WMI manages 12 dairy units and operates 10,000 cows which produce 4 million kgs of milk solids a year and is the biggest single supplier to Miraka (the Maori word for milk).

Miraka has been the culmination of more than 10 years effort on Kingi’s behalf to lift the performance of the Maori agri-business sector. He has taken a key leadership role in this, fronting a series of initiatives like the Tairawhiti Land Development Trust which combined with the Ahuwhenua Trophy Maori Excellence in Farming Competition have seen the sector make some significant economic gains. The Ahuwhenua Trophy Competition is now considered the premier calendar event in the sector.

A former partner in Ernst & Young specialising in business and corporate restructuring, Kingi is a professional director. He is also on the board of Mangatu Blocks, one of the largest Maori meat producers and owner of Integrated Foods which processes and exports internationally.

A supporter and member of the Federation of Maori Authorities since 1987 Kingi was also instrumental in achieving the change in ending the leases in perpetuity over major Maori land blocks which was a historical milestone.

Federation CEO TeHoripo Karaitiana, who sits with Kingi on the WMI board, said the award was due recognition for a man whose vision, energy and leadership has had a transformational effect in Maori agribusiness and beyond.

“Kingi is not a man who seeks this type of recognition but it is simply impossible to ignore the extraordinary impact the initiatives that he has lent his energy to have had on the Maori agri-business sector,” he said. “For those that have worked with him, and I count myself lucky to have been one of them, you cannot help but appreciate his commercial astuteness and highly effective leadership style. He brings the same determination and discipline to his business activities that he does to his sporting pursuits.”

Kingi, whose whakapapa connections are to Ngati Kahungunu, Te Aitanga a Mahaki, Te Atiawa, Whakatohea and Tuhoe completed his first Taupo Ironman in 1997 and is now in the elite club of those that have completed 10 or more in Taupo. He also competes internationally and has achieved a very respectable ranking at masters’ level.

“The challenge of doing something that pushes your mind and body to its limit is what keeps me motivated,” Kingi said. “The Ironman offers no mercy and preparing to any eventuality – physically, mentally and weather-wise – is key to completing the race.”

He applies the same approach when considering business propositions and before embarking on new ventures, which have marked his greatest accomplishments to date.

Federated farmers Chief Executive officer Conor English presented the trophy to Mr Smiler at the FOMA annual conference being held in Hastings. Mr English said, “Maori are huge contributors to agriculture, exports and our rural communities. This award recognises the drive, entrepreneurship and success that is being demonstrated right across Maori agriculture every day. Kingi Smiler is a true leader and a well deserving recipient of this prestigious award,” Mr English concluded.

Kingi Smiler named Agribusiness person of the year

#gigatownomaru applauds success.


Fonterra: record results highest payout

22/09/2011

Fonterra has announced record financial results for 2011 and its highest payout of $8.25 before retentions.

The payout comprises a farm gate milk price of $7.60 per kilo of milk solids and a distributable profit of 65 cents a share.

The payout before retentions is $1.55 higher than the previous season’s $6.70 and better than the previous record of $7.90 in 2008.  The cash payout of $7.90 is also a record and is $1.53 higher than the prior period’s $6.37. 

Other highlights:

  • A 13 per cent increase in after tax profit to $771 million for the year ended 31 July 2011.
  • A 19 per cent increase in revenue to $19.9 billion, a new record for Fonterra.
  • The annual Dividend is being increased to 30 cents per share, a 3 cents per share or 11 per cent increase on last year’s 27 cents per share. Dividends are paid out of Distributable Profit.
  • Fonterra’s balance sheet is in its strongest shape ever, with an economic gearing ratio of 41.8 per cent, compared with 44.9 per cent a year earlier.
  • Fonterra collected a record 1,346 million kgMS of raw milk in the 2011 season, 5 per cent higher than the prior season.
  • Dairy exports for the year totalled 2.1 million tonnes, another record for Fonterra.

A media release form the company says:

The results reflect an improved performance by Fonterra’s ingredients businesses that export to more than 100 markets as well as by overseas consumer businesses, especially across Asia and the Middle East. However, consumer business profits in New Zealand and Australia were down in a tough market environment.

Chairman Sir Henry van der Heyden said the record financial performance and record milk production meant Fonterra would distribute milk payments and dividends totalling $10.6 billion – $2.4 billion more than in 2010 and $1.5 billion more than Fonterra’s previous best year in 2008.

“As Fonterra is a Co-operative that is 100 per cent owned and controlled by New Zealand farmers, that money flows right back into the local economy as farmers reinvest in their businesses and buy more farm supplies and equipment.

“An independent report by the New Zealand Institute of Economic Research (NZIER) last December found that the benefits of a higher Fonterra Payout extend well beyond farmers, as they spend around 50 cents out of every dollar earned on locally produced goods and services.”

Sir Henry said the record Farmgate Milk Price of $7.60 per kgMS was well up on the prior season’s $6.10 per kgMS and reflected the recent strength of world dairy markets, with prices in some categories reaching or nearing historical highs during the past year.  In addition, Fonterra’s hedging policy shielded farmers from the full brunt of a stronger New Zealand dollar, especially over the latter stages of the year.

“We also benefited from record milk production, as some of the best autumn conditions in recent years offset poor weather in many regions earlier in the season.”

Sir Henry said the 2011 Farmgate Milk Price as calculated in accordance with the Farmgate Milk Price Manual is $7.60 per kgMS. The average amount available to pay for share-backed supply is $7.59 per kgMS, after adjusting for winter milk premiums and contract milk discounts.

He said the dividend of 30 cents per share equated to 69 per cent of adjusted Distributable Profit, which was consistent with the Board’s policy to distribute 65-75 per cent of profit after adjusting for one-off items and other factors.

Fonterra CEO Andrew Ferrier said Fonterra achieved a 13 per cent increase in net profit after tax, to $771 million, even after paying farmer shareholders 29 per cent more for the milk they supplied. 

“Although the business was impacted by higher dairy ingredient prices and a fragile global economy, our underlying profitability showed solid growth over last year due to improvements within our ingredients businesses and the strength of our consumer brands.”

Normalised earnings from Fonterra’s Standard & Premium Ingredients segment were 36 per cent higher than the previous year. As segment earnings are dependent on selling a mix of products at average prices above the cost of milk, this was an encouraging result in the face of a much higher Farmgate Milk Price, Mr Ferrier commented. Earnings growth reflected improved efficiencies in the manufacturing and supply chain, refinements to the product mix and growth in the higher-margin premium ingredients business.

Revenue from the consumer businesses hit a new record of $6.1 billion. However, the consumer businesses faced a challenging year as margins came under pressure from the rise in commodity prices.

Mr Ferrier said the standout consumer business segment was Asia/Africa, Middle East, with normalised earnings rising 12 per cent.  “We continue to focus on high quality nutritional and foodservice solutions that leverage our trio of power brands, Anchor, Anlene and Anmum.”

 This result is welcome news for farmers and the wider economy however, the current season is not expected to be as good.

The board confirmed its forecasts for the current 2012 season and 2012 financial year of  $6.75 per kgMS and the forecast distributable profit range is 40-50 cents per share. 

That reflects a softening of global commodity prices since early this year and confirms the wisdom of farmers who have used profits from the past season to reduce debt.

Sir Henry said it was fitting that the record result was achieved as Fonterra marked its 10th anniversary: 

 “Ten years ago, the New Zealand dairy industry came together to form a national champion in Fonterra. Our collective vision was to create a business with the scale to become a world leader in dairy ingredients and maximise dairying’s contribution to the New Zealand economy.  That’s exactly what Fonterra is doing.”

We can all be grateful that the company is succeeding in its aim and also for the work Fonterra and successive governments have done in opening up new markets in Asia, the Middle East and Latin America.


Rural round-up

24/07/2011

Interest in merino born in childhood – Sally Rae:

Jayne Rive attributes her love of merino sheep to growing up on remote Halfway Bay Station.

She and her five siblings were all involved in daily station life, including working with sheep, on the property on the western shores of Lake Wakatipu . . .

Stock judge wins national title – Sally Rae:

Olivia Ross proved she has an eye for stock when she won the New Zealand Young Farmers national stock judging competition.

A member of Nightcaps Young Farmers Club, Miss Ross (23) works as a field consultant for Outgro Bio Agricultural Ltd . . .

Fitting milestone as CRT cracks $1b – Sally Rae:

Rural servicing co-operative CRT has cracked the billion-dollar mark – reporting turnover of $1.092 billion and an operating surplus of $8.4 million in the year to March 31.

That was up from a turnover of $801 million and an operating surplus of $5.1 million in the previous year. . .

Well managed systems key to dairy success – Mary Witsey:

The most profitable dairy farms in Southland are those which are well managed.

That was the message the province’s dairy farmers heard from Dairy New Zealand senior economist Matthew Newman, who was in the south last week conducting seminars.

Regardless of the size of the herd, or whether it was a low, medium or a high-input production system, the most profitable farms were those that made the best use of resources on offer, Mr Newman said . . .

Warning on dire state of apple industry – Peter Watson:

Nelson’s apple growers are in such a dire state the region risks not having a viable export industry in five years, leading local businessman John Palmer warns.

Speaking at a Nelson-Tasman Chamber of Commerce luncheon yesterday, he said it had got to the stage where many orchards were more valuable without their trees and would be “less of a cash drain growing grass than growing apples”. . .

New Fonterra boss wants positive impact – Hugh Stringleman:

A Canadian will hand over management of Fonterra to a Dutchman at the end of September, which indicates that the skills needed to run New Zealand’s biggest company are more readily found offshore.

Theo Spierings, aged 46, has been appointed by the Fonterra board as the new chief executive to take over from Andrew Ferrier, who has held the job for eight years . . .

Welcome end in sight for forced farm sales – Tony Chaston:

Is this just real estate spin or is rural real estate on the move again and can we expect modest price rises based on stronger product prices and profits?

As reported earlier from the June real estate figures, more farms are being sold than last year, but at values last seen in 2004. The banks have signaled their intention to lend more on profits and less on land value, so if product prices continue, we can expect more sales. . .

Better information needed on farm technology – RadioNZ:

Pastoral Agriculture Professor Jacqueline Rowarth of Massey University thinks farmers are not being well served by some of the new technology they’re being urged to adopt, to lift production.

Professor Rowarth, who spoke at an Agricultural & Horticultural outlook summit this week, says New Zealand farmers are doing a good job of taking up new ideas. She says that’s clear from statistics which show  agriculture is one of the few sectors that continues to grow.

Market knowledge the key – Debbie Gregory:

KNOWLEDGE about commodity prices and markets helps farmers future-proof their businesses, says ANZ National Bank agri-economist Con Williams.

Speaking to farmers and others involved in the rural industry in Gisborne this week, he said commodity prices across the board had peaked and would soften, but should remain at a relatively high level compared with prices seen in the past.

“It’s not so much the level they have got to, it’s the speed they have got there,” he said . . .

Hat tip: Interest.Co.NZ


Theo Spierings new Fonterra CEO

14/07/2011

Fonterra has named its new CEO – Theo Spierings, a Dutchman with 25 years experience in the global dairy industry.

Fonterra chair Sir Henry van der Heyden said:

“Mr Spierings has a wealth of experience in managing dairy businesses across Asia, Latin America, Africa, the Middle East and Europe,” Sir Henry said.

“Most importantly, Mr Spierings has an in-built respect for the co-operative structure and for farmers and their commitment to co-operative principles. He is well recognised by his peers for his people leadership, delivery of results and strong strategic skills.”

This will resonate with Fonterra’s shareholders who are resolute in their determination to retain farmer control and the co-operative structure.

Mr Spierings was acting CEO of Royal Friesland Foods when he presided over all aspects of its complex and highly sensitive merger with Campina. He left the company shortly after completing the merger as, prior to the transaction, both parties had already agreed on an independent CEO to take the new entity forward.

Sir Henry said as well as a 25 year history in the global dairy industry, Mr Spierings had held a variety of general management, operations and supply chain and sales and marketing positions across a number of geographies.

Mr Spierings said the role of CEO for Fonterra was a great opportunity, working in the industry he loved.

“I am honoured to be invited to lead Fonterra into its second decade,” Mr Spierings said.

“The Fonterra Board, Andrew Ferrier and his team have established a strong foundation and my challenge is to build an even more successful global dairy co-operative.

Mr Spierings said he was familiar with both Fonterra and its key people and had great respect for the foresight New Zealand farmers had shown in creating Fonterra in the first place.

“A huge amount has been achieved in the past 10 years since Fonterra was established. Trading Among Farmers – the newly approved capital structure – is a good example. But what makes Fonterra really unique is its combination of low-cost pasture based farming and its status as the world’s largest milk processor.”

With the co-operative already performing strongly, Mr Spierings said it was clear that the challenge ahead was to add another layer of value across the business.

“I am used to working for farmers and I know they demand results. Being entrepreneurs themselves, they expect continuous improved performance of both their co-operative and through-out the value chain,” Mr Spierings said.

”I am acutely aware of Fonterra’s importance to the New Zealand economy and look forward to leading an organisation that has the potential to have such a positive impact on its home country. I thrive on the prospect of contributing to Fonterra’s continued success, which I know is of great importance to not only its farmers and employees, but to every New Zealander.”

Mr Spierings, aged 46, holds a Bachelor of Arts-degree in Food Technology/Biotechnology and a Masters in Business Administration. He is married with three children and currently lives in The Netherlands. He owns and runs his own company which focuses on corporate strategy and mergers and acquisitions in fast moving consumer goods.

The 2011 financial year would be a record one for Fonterra and announcing thre results will be one of Andrew Ferrier’s last duties with the co-operative before his successor takes over on September 26.


Celebrating winners counters tall poppy syndrome

03/07/2011

Fonterra CEO Andrew Ferrier is Federated Farmers Agribusiness Person of the Year.

This is fair recognition of the work he has done in the nearly eight years he’s led the company.

Agri-Personality of the Year  was awarded to John Hartnell and the Farmy Army.

John Hartnell was nominated to recognise his leadership of the ‘Farmy-Army’, which assisted Christchurch’s earthquake recovery from February of this year and again in June.

John was prepared to lead the Federation’s efforts to help the people of urban Christchurch in the recovery phase of the earthquake’s aftermath. In taking on the role as Federated Farmers Earthquake Spokesperson the morning after the earthquake, John worked closely with Civil Defence to understand the immediate needs of Christchurch residents and to identify assistance that would fit with the abilities and enthusiasm of our farmer members.

Over the next two days, John worked closely with a core group of Federated Farmers members to assemble a volunteer group and a base at the A+P Showgrounds. This included a team of support staff, team leaders and cooks. Sponsors were very keen to help in tangible ways, including cash donations, equipment, food and drinks.

The media were inspired by the actions of Federated Farmers and thus, the ‘Farmy Army’ was born.

We all know the efforts and achievements in the four weeks of help given to Christchurch and now, a further week jointly with the Student Volunteer Army.

What has amazed many, are the number of Christchurch people who, upon learning you are a farmer, very quickly and without prompting say, “are you part of the Farmy Army? What a magnificent job”, or “they arrived an cleared my elderly neighbour’s section” and “they cleaned up my driveway when I was away working”, “They were a Godsend”

The actions of the Farmy Army did a tremendous job in breaking down the rural-urban divide with compassion and caring shown by country people; something not so often seen in big cities today.

Most certainly John was assisted by a large team, but his leadership, inspiration and dedication to that team was a pivotal part of the success of the Farmy Army. John’s trademark “hand on the shoulder” is his most genuine was of saying “Thanks, your help is most appreciated”.

Mr Hartnell played tribute in his acceptance to Murray Rowlands, North Canterbury Grain & Seed chairperson, for his leadership during last year’s Canterbury earthquake. Overall, John Hartnell, Commander in Chief of the Farmy Army, is a deserved winner of the 2011 Agri-Personality of the Year on behalf of everyone who volunteered in the Farmy Army.

 Federated Farmers Cream of the Crop awards recognise those who have won various national awards over the past twelve months went to:

New Zealand Dairy Industry Awards Sharemilker / Equity Farmers of the Year – Jason & Lisa Suisted

New Zealand Dairy Industry Awards Sharemilker / Equity Farmers of the Year Federated Farmers Leadership Award – Richard and Joanna Greaves

New Zealand Dairy Industry Awards Farm Manager of the Year -Jason Halford

New Zealand Dairy Industry Awards Dairy Trainee of the Year – Ben Smith

Rural Women New Zealand Enterprising Rural Women Supreme Awards – Lisa Harper

Ahuwhenua Trophy BNZ Māori Excellence in Farming Award – Waipapa 9 Trust (Dawson Haa, Chairman)

NZ Young Farmers National Bank Young Farmer of the Year 2010 – Grant McNaughton

New Zealand Farm Environment Award Trust Ballance Farm Environment Award – Grant and Bernadette Weller.

One way to counter the tall poppy syndrome  is to celebrate winners and this initiative by Federated Farmers does that well.


Rural round-up

05/06/2011

Dairy farmers can produce a green dairy industry – Pasture to Profit writes:

The Dairy Industry has the potential to produce its own electricity & be clear of the National Grid. What a PR victory that will be for the first UK dairy company & their suppliers. What a wonderful image that will be for milk, cheese & butter! Every dairy farmer must get involved to “kick this goal” for the dairy industry. We have a fantastic opportunity right now with interest free loans & massive incentives . . .

Volunteer will help in Samoa – David Bruce reports:

From farming crocodiles to helping improve small agricultural businesses, Bill and Shirley Kingan have had a wide variety of experiences under Volunteer Service Abroad.

Mr and Mrs Kingan leased out their Enfield farm, then joined the New Zealand organisation which, since 1962, has been sending volunteers overseas to help other countries and communities improve their lives. . .

Integrity, beauty and strength – Sally Rae writes:

There’s something special about a Clydesdale horse. Clydesdale Horse Society of New Zealand president Bill Affleck believes the allure stems from what the gentle giants have achieved in the farming world.

Coupled with a very placid nature, “there’s something there that’s very appealing”. . .

Future’s glowing –  Sally Rae again:

If you had told former Stewart Island fisherman Dil Belworthy that he would end up owning a chain of clothing stores, he would have said being abducted by aliens was more likely.

Mr Belworthy is not kidding when he says the path he and his wife, Catherine, have taken to owning five Glowing Sky Merino stores, as well as a manufacturing facility, is “quite bizarre”. . .

Who will Fonterra’s new boss be?  – Andrea Fox asks:

With the clock ticking down to the announcement of Fonterra’s new chief executive, ex-General Motors financial chief Chris Liddell and Air New Zealand’s Rob Fyfe have been ruled out of contention, with the money on an internal appointment.

Sources said number two at the dairy giant, trade and operations managing director Gary Romano, is strongly favoured to succeed Canadian Andrew Ferrier, who will leave in the second half of this year. . .

A dairy farm to impress the world – Jon Morgan writes:

Rick Morrison and Sharleen Hutching are a quiet, unassuming couple who prefer to let their actions speak louder than words.

When the judges in the Horizons region of the Ballance Farm Environment Awards gave them warning of a visit to their 200-cow dairy farm near Eketahuna, they didn’t change a thing. “It was, ‘Oh yeah, whatever’,” Mr Morrison says. “We just carried on as normal, no need to rush around tidying things up.” . . .

Firms plan $3.7m Gore investment

Two Southland-based farm-machinery firms plan to make $3.7million investments in Gore.

Advance Agricentre and Southland Farm Machinery agree their investments are a vote of confidence in the district’s economy. . .

Robots to takeover meat works:

After 20 months’ intensive research and development, the Ovine Automation Consortium is ready to go to market with two robots that signal the start of a new era in automated sheepmeat processing.

Funded by the Ministry of Science and Innovation and nine industry members, with the support of two research organisations, the research consortium aims to enhance sheep processing productivity and quality through the use of automation. . .

Wine the organic puzzle –  Rebecca Gibb writes:

Patting cows and admiring piles of dung was not what I had envisaged when leaving Auckland behind for rural Marborough.

I thought I was there to tour organic vineyards for the vital purpose of tasting wines, but instead found myself transported to the set of The Good Life. Had I mistakenly been picked up by Richard Briars and Felicity Kendal at Blenheim airport, or are cows, sheep, and a gaggle of geese really what organic wine is all about? . . .

Beekeeping in a nutshell – Raymond Huber posts:

It’s Bee Week, celebrating our partnership with honey bees. Hand-made beehives date back 3000 years (in Israel) and early hives were made of clay or straw. Bees and humans helped each other expand into new lands: as settlers took the bees with them for crop pollination. For centuries beekeepers melted the comb to get the honey out, forcing bees to rebuild it. Then in 1851 pastor Lorenzo Langstroth designed a hive like a filing cabinet that could be used over and over. . .

Talk about succession – Gerald Piddock writes:

One of the deer industry’s next generation is urging farmers to talk more openly about the issues around succession.

The average age of the New Zealand farmer was over 50. At that stage many would soon be wanting to exit the industry, Hamish Fraser told farmers at the Deer Industry Conference in Timaru.

“Getting succession right will be key to allowing this to happen,” he said. . .


Low incomes not high prices still the problem

13/04/2011

Fonterra agreed to freeze the price of milk for the rest of the year but other dairy products are getting more expensive:

The price of cheese and yoghurt could be on the way up at a supermarket near you.

Cafe owners supplied by dairy processor Goodman Fielder have received word the price they pay for some dairy products will go up from next Monday.

Some say that’s a result of Fonterra’s freeze on milk prices, and the same could happen in supermarkets.

Fonterra CEO Andrew Ferrier was interviewed about this on Campbell Live last night. He said the company’s profit margin on milk was around 12%:

“All we do is run a milk price which converts the world market price to the New Zealand equivalent,” . . .

Mr Ferrier says it is the distributors who set the price consumers pay in the supermarket.

“Ultimately it’s the distributors who are buying product – whether you are in a dairy or a supermarket – who will set pricing polices as they see fit.

“They buy from us and they have there own pricing policies.”

He reiterates that Fonterra is not pointing the finger at supermarkets, saying price structures are often very complex.

“I’ve been in business a long time, the last thing you do is try to put important customers in a difficult situation – and I won’t.”

I have no doubt that price structures are complex but how often do you see milk, cheese or yoghurt on special?

What about other basic foods – meat, eggs, bread, fruit and vegetables?

Is it my imagination or are non-staple foods and grocery items on special much more often than the staples, most of which are produced domestically if not locally?

Regardless of the answer to that question, higher prices for goods we export are good for the country. Producers are already benefitting from better returns and that will filter through the economy. Unfortunately the higher prices are filtering through first which makes it difficult for people on limited budgets.

But the problem of affordability is not high prices it’s low wages and better prices for exports is one of the best ways to improve them.


Ferrier leaving Fonterra

01/03/2011

Fonterra CEO Andrew Ferrier is leaving the company later this year.

Mr Ferrier said that, with Fonterra in good shape, it provided the right opportunity for the transition. He said that he intended to continue living in New Zealand after he left Fonterra, but wanted the flexibility to spend a little more time with family, including in his homeland Canada.

“I have always thought that a successful CEO should build a culture and capability in an organisation, to ensure that it continues to improve when you move on,” Mr Ferrier said. “Fonterra is a great co-operative and, when I leave, I will have absolute confidence in it becoming even stronger in the future.

“I have had 17 years as a CEO, including eight years at Fonterra, and I am looking forward to more flexibility in my life, spending more time with my family, and choosing from a number of business interests that are available to me.”

The low point for Fonterra under his tenure was the Sanlu contaminated milk powder tragedy.

There have been many high points, including  growth in international markets, development of new products and record payouts to shareholders.


Dairying doing it for NZ

09/12/2010

It’s easy to see the positive social and economic impact dairying makes in North Otago, there is now proof of how the wealth generated from milk benefits the whole country.

An independent report by the New Zealand Institute of Economic Research, released today, shows money from milk flows right through the economy, starting at the farm gate and moving out to rural and urban communities.

The report to Fonterra and DairyNZ shows:-

  • Dairy provides 26% of New Zealand’s exports.
  • A $1 rise in Fonterra’s payout makes every New Zealander nearly $300 better off.
  • Dairy farmers spent around 50c in every dollar they received on locally produced goods and services.
  • Every tonne of dairy exports helps reduce the current account deficit, bringing down interest rates and reducing mortgage payments for homeowners.
  • Dairying employs 35,000 workers directly and a further 10,000 contractors.

Fonterra CEO Andrew Ferrier said today the report, commissioned by Fonterra and DairyNZ, will enable New Zealanders to better understand that when dairy does well, New Zealand does well.

“Most people understand dairy is a key export industry. Now they can understand what it means for them as the report accurately quantifies, for the first time, the tangible benefits to both rural and urban communities,” said Mr Ferrier.

An increase of $1 to Fonterra’s payout boost real incomes by about $270 for every person in New Zealand, showing everyone benefits when the company does well.

“Of the $7.5 billion farmers received in 2009, $3.6 billion was spent on domestically produced goods, including fertiliser, feed, agricultural services and financial services.

“There is no doubt that dairy has helped us out of the recession and the benefits extend well beyond the farm gate.  Export growth from the dairy sector has helped narrow the current account deficit and that helps everyone through lower interest rates on mortgages and other borrowings.”

NZIER Deputy Chief Executive, John Ballingall, said: “Our modelling shows that the dairy sector has delivered significant and ongoing benefits to the New Zealand economy.”

“Its influence extends well beyond its direct impacts in dairying areas, with the sector closely intertwined with the rest of the economy. That includes the jobs it delivers, the income that these workers earn, its links to supply firms, the effects of rural economic growth on urban centres and the tax revenue it provides to fund public services.

“The sector’s strength has been very evident as New Zealand recovers from the global financial crisis and domestic recession. Given anaemic domestic demand, the export side of the economy has been relied on to generate economic growth and dairy has made a significant contribution.”

DairyNZ Chief Executive, Dr Tim Mackle, said that last year dairying kept 35,000 people directly in work. “Our contribution to jobs is like having a city the size of Gisborne all working in the dairy industry. Urban centres also get a healthy share of indirect employment as they provide essential goods and services that are needed to produce dairy products.”

Dr Mackle said the NZIER report shows dairy accounts for 26 per cent of New Zealand’s total exports and it is looking to grow its contribution to the country.

“We’ve got a good track record of supporting regional growth, which this report shows, and we want to continue this trend. The challenge for our industry will be in how we achieve this growth in a sustainable way,” said Dr Mackle.

Highlights of  dairying’s contribution to the regions, based on 2009 figures,  include:

Waikato

  • Regional dairy production was worth $2.4 billion in 2009 (Matamata-Piako $552m, Waikato district $390m, Waipa $361, South Waikato $263m, Hauraki $196m)
  • More than 8,000 employed in local dairy industry

Bay of Plenty 

  • Regional dairy production was worth $605 million in 2009
  • Dairy revenue of $254m in Rotorua district
  • Bay of Plenty employs more than 3,200 directly in the dairy industry

Taranaki 

  • Regional dairy production was worth $822 million in 2009
  • Taranaki employs almost 3,900 directly in the dairy industry
  • 26 per cent employed in South Taranaki district by dairy industry, nearly 9 per cent of total dairy related employment in New Zealand

Manawatu-Wanganui/King Country

  • Dairy production in Otorohanga was $234m in 2009 and Tararua $188m
  • These regions employ more than 3,200 directly in the dairy industry

Canterbury

  • Regional dairy production was worth nearly $1 billion in 2009 (Ashburton $471m, Selwyn $270m, Timaru $185m)
  • Canterbury employs nearly 3,500 directly in the dairy industry

Otago/Southland

  • Regional dairy production was worth nearly $900m in 2009 (Southland $710m, Clutha $182m)
  • Otago/Southland employs more than 4,200 directly in the dairy industry.

The full report is here.


Fonterra final payout 2nd highest

23/09/2010

Fonterra has announced a final payout for the 09-10 season of $6.70 before retentions.

The payout is made up of $6.10 per kilogram of milksolids (kgMS), a dividend of 27 cents a share and retentions of 33 cents share. 

This is the co-operative’s second highest payout and will give shareholders who are fully shared up a final payout of $6.37.

Fonterra reported a 12 per cent increase in after-tax profit to $685 million for the year.

Looking ahead, Mr Ferrier said there were signs that international dairy supply and demand were moving more in balance at prevailing prices, although there was still considerable volatility in international markets.

After considering these factors, the Board has firmed up the forecast payout for the 2010/11 season to $7.00-7.10 (before retentions). This includes an unchanged forecast Milk Price of $6.60 per kgMS.

Jamie Mackay listed on the Farming Show the payouts for previous seasons: (I think these are after retentions).

2001-02: $5.50; 2002-03: $316 ; 2003-04: $4 59; 2004-05:$ 410; 2005-06:$4.46; 2007- 08: $ 766; 2008- 09: $5.20.


Milk payout up again

27/04/2010

Fonterra has announced an increase in the forecast  milk price and distributable profit which should take the payout up to $6.30 – $6.40.

In a newsletter to shareholders board chair Henry Van der Heyden says:

  • The Board met today and has announced an increase in the forecast Milk Price for 2009/10 to $6.10 per kgMS. This is up 40 cents from $5.70.

  • We are holding our forecast Distributable Profit range at 40-50 cents per share.

  • The forecast Dividend to farmers remains unchanged – we’re still targeting 20-30 cents per share. This means 10-30 cents per share of the Distributable Profit will likely be retained.

  • The board will discuss the opening forecast for next season at its May meeting and is advising farmers to budget on a similar price to this season’s.

    This is the second best payout Fonterra has made and will be particularly welcomed by farmers who’ve had to dry off early because of the drought.

    The company will make progressive increases in payments over the next six months which will help cash flow.

    It might also help persuade farmers to buy more dry shares.

    A media release from the company says:

    Fonterra CEO, Andrew Ferrier, said that, since the last Milk Price forecast, dairy prices had remained relatively high and more stable than expected for several months, and had recently increased further.   

      “The global supply/demand balance for dairy products has shifted to a slight supply deficit.  Demand from Middle East/North Africa and Asian markets continues to grow.  On the supply side, global milk production has continued to slow, with production contracting in several key markets.  For instance, supply has been affected by a tough winter in Europe, while North America and Australia production is also down.   In New Zealand, the effects of drought mean Fonterra’s production is now projected to be similar to last season, compared to the modest increase that we forecast at the beginning of the season,” Mr Ferrier said.

     Although the net effect was good news for the Milk Price in the short term, Mr Ferrier cautioned that the market continues to show significant volatility. 

    Jamie Mckay spoke to Andrew about the payout increase on the Farming Show today.


    Dairy payout forecast lifted to $5.10

    22/09/2009

    Fonterra has announced a 55 cent increase in its forecast payout.

    Last season Fonterra’s forecast payout was revised downwards twice. When this season’s forecast was set at $4.55 we hoped the company was being cautious so that any change would be upwards. That’s the case with today’s announcement of a new forecast payout of $5.10.

    Fonterra Chairman, Sir Henry van der Heyden, says the revised forecast reflects a sustained improvement in commodity returns and a more positive outlook in international dairy markets. Sir Henry says farmers will begin to benefit from the higher payout forecast from next month, with a lift in Fonterra’s Advance Rate schedule of payments to farmer-suppliers.

     “We’ve had really tight cash flows on farms going into this season, and some serious belt tightening to get through. This will give our farmers a bit of relief and some extra flexibility to get the best out of their farms this year.”

     CEO, Andrew Ferrier, said demand had strengthened and there wwas a robust recovery in international dairy prices.

    “What we’re seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board. Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction.

    “While this is good news for our farmers in New Zealand, we remain in a period of extreme price volatility, which makes forecasting challenging, to say the least.”

    In other words, it’s still too early for champagne, but another celebratory milkshake might be in order.

    The company announces its 2008/09 financial results and confirms last season’s payout tomorrow.


    Melamine scandal gets murkier for Fonterra

    28/01/2009

    Tian Wenhua the former chairwoman of Sanlu who was convicted for her part in the melamine milk poisoning scandal said she acted on advice given by a Fonterra board member.

    But Fonterra’s chief executive Andrew Ferrier says the company was always clear there was no safe level of melamine in milk.

    China’s state news agency, Xinhua,  . . .  said rather than stopping production of tainted products after the contamination was confirmed on August 1 last year, Sanlu decided to limit melamine levels to within 10mg for every kilogram of milk.

    “Tian said during her trial that she made the decision not to halt production of the tainted products because a board member, designated by New Zealand dairy product giant Fonterra that partly owned Sanlu Group, presented her a document saying a maximum of 20mg of melamine was allowed in every kg of milk in the European Union,” Xinhua said. “She said she had trusted the document at that time.”

    Mr Ferrier told the Herald a Fonterra representative had given Tian the document soon after the board was advised of the contamination on August 2.

    “The context was when this whole thing broke there was an enormous amount of work going on to find out what melamine was and there was research all over the world about its contaminants, its danger,” Mr Ferrier said. “There was information pulled up from Europe, from the US, everywhere.”

    . . . Mr Ferrier said: “I do want to be crystal, crystal clear – although there was lots of information that was pulled up we were vividly clear to Sanlu that the only acceptable level [of melamine] was zero.”

    At no point did Fonterra tell Sanlu it was acceptable to keep producing to the melamine level in the report, he said. “Absolutely not, absolutely not.”

    I believe Ferrier but it’s not me he needs to convince, it’s consumers who rely on the company’s commitment to the highest possible safety standards for its products.

    Just a few months ago Fonterra was being held up as the model to which other processors of primary products should aspire. The fall in world commodity prices is  a large part of the reason this has changed and the company can’t be held responsible for that. But another reason is that it has not handled the melamine scandal well.

    As Keeping Stock says:

    . . . Fonterra still has a lot of questions to answer, and there’s no escaping the perception, whether merited or not, that Fonerra has been less than transparent throughout.

    Fonterra has appeared to be on the backfoot throughout  the whole sorry saga and Roarprawn  is right when she says the company needs a rocket.

    Paul Henry discussed the issue with Fran O’Sullivan on Breakfast yesterday and she said that the company made a fundamental mistake at the start by thinking the scandal could be isolated as a Chinese problem. She also said that journalists have been unimpressed by the slow response from the company.

    A large company ought to understand the importance of not just being on top of such a potentially damaging issue but showing the world it is on top of it. Regardless of how well the Fonterra may be handling things behind the scenes its poor public relations are giving the impression it’s not handling things well at all and allowing questions over its involvement in the melamine scandal to fester.


    60c less per kilo = $714m less for NZ

    21/11/2008

    Fonterra’s revised forecast payout has been reduced by 60 cents to $6.00a kilo.

    That’s a reduction in expected income of about $120,000 for the average dairy farm and a loss of $714m for the New Zealand economy.

    Fonterra Chairman, Henry van der Heyden said today that declining prices across all commodities, including dairy, had been exacerbated in recent weeks by the global financial crisis.

    “There is a great deal of uncertainty around the world, industry and trade activity is slowing down and all the forecasts are pointing to a global recession. We have seen a real tightening in consumer spending and dairy is not immune to this rapid deterioration in the global economy.”

    We have kept conditions under close review and brought forward our forecast revision so farmers know exactly where they stand as they work through their budgets for next year. The message is for farmers to be cautious in their planning.”

    Company chief executive Andrew Ferrier said, given current conditions, demand was unlikely to recover by mid-2009 as initially expected.

    “While the medium to long term outlook for dairy remains positive the financial crisis has driven commodity prices down further and, with consumer confidence deteriorating, it is likely that prices will remain weak, rather than recover, through our fiscal year.”

    Ferrier said that as the world economy retreated, commodity stocks were building and these would need to be cleared before prices improved.

    “The market has not yet absorbed the surplus stocks from the US. In addition, stocks in the EU are building. This combination of excess stocks and weak demand has driven prices down rapidly. A rebalancing of the market is unlikely in the short term,” he said.

    A couple of seasons ago this payout would have been greeted with excitement and it’s still above the long term average, but after last year’s $7.90 payout and the earlier forecast for this season of $6.60 it’s disappointing.

    It’s only a few months since Jeanette Fitszimons was asking Fonterra to subsidise consumers because of steep rises in the price of dairy products on the domestic market. I doubt she’ll be suggesting consumers subsidise the company now the price it receives is falling.


    Fonterra responds on ethics

    12/10/2008

    Last week’s NBR led with a story linking the disbanding of Fonterra’s ethics committee with the San Lu crisis and I commented on it here.

    The comapny’s CEO Andrew Ferrier responded to the NBR with a letter to the editor this week saying the story was without foundation.

    It’s not on line so here’s an abridged copy:

    The suggestion that Fonterra has become a less ethical organisation under my leadership is outrageous and I reject it utterly. There is simply no factual basis for this story. . .

    The article was entirely based on observations by the former external chairman of our internal ethics committee, Dr Simon Longstaff.

    . . . As management and staff at Fonterra can verify, integrity and ethics are absolutely at the core of Fonterra’s way of working and corporate values and of my management style.

    It was my decision . . . to disband the committee in the form that it was because I wanted to elevate ehtical considerations to the highest level of management under my personal direction.

    Ethics has to be instilled and driven through an organisation from the very top and should not be the responsiblity of a middle and lower level management sub group.

    . . . My and Fonterra’s every action in handling the San Lu crisis has been driven at all times by the highest ethical considerations. . . Fonterra’s sole priority was the health and safety of Chinese consumers and taking every practical step within the constraints of the Chinese system to protect them. . .

    I have no questions over Fonterra’s ethics and agree with the importance of instilling ethics through an organisation rather than regarding them as an adjunct.

    My concern is that Fonterra’s very high standards did not seem to be shared by San Lu in which it had a 43% investment.

    Neither company can be blamed for the melamine poisoning which was an act of sabotage. But had the ethics and quality standards which Fonterra requires in every link of the production chain in New Zealand been required by San Lu in China the contamination would almost certainly have been picked up before anyone’s health was put at risk.

    The company has learned the hard way about the difficulty of investing in other countries whose systems and standards are so different from ours. But the real test will be what it does now to ensure its standards are met everywhere it operates and that may mean it has to have a majority share in any overseas investments.


    Fonterra donates $8.4m to Chinese charity

    10/10/2008

    Fonterra has donated $8.4m ($US 5m) to a Chinese charity to establish a health care programme for mothers and babies in poor rural areas.

    “We want to do what we can in China to help, particularly in areas around infant health and maternal issues,” Fonterra chief executive Andrew Ferrier, told NZPA.

    He today signed a memorandum of understanding in Beijing with China Soong Ching Ling Foundation secretary Li Ning to fund the programme over five years.

    It will set up community centres in rural and underveloped areas, with tools and resources to support prenatal and postnatal care, and provide information to ensure healthy pregnancies and babies.

    Babies in poor and rural areas were some of the first reported to be affected by melamine-contaminated infant milkpowders sold by Fonterra’s Chinese joint venture, Shijiazhuang Sanlu Group Co, in which it held a 43 percent stake.

    For more than a week reports on the numbers of babies who had become ill had remained at four dead, 12,892 infants in hospital, 104 with serious illness, and close to 40,000 others affected but not needing major treatment.

    But Reuters reported this week the number of affected children has risen to nearly 94,000, 46,000 of them in Hebei province, where Sanlu is based, and neighbouring Henan province.

    But Mr Ferrier said the $US5m donation was a gesture which should stand on its own as a reflection of the tragedy: it was not trying to link it to the milk contamination.

    “Being associated with healthy food to infants…in the environment of this huge tragedy that has happened across the country, we thought that this would be a small gesture that Fonterra could show the broader Chinese community that we really care about children and their health,” he said.

    “If we can help Soong Ching Ling Foundation particularly help infant health in rural areas where there’s the most poverty, that’s a great place to be helping out.”

    The foundation already has a successful project for the safety of mothers and infants.

    The new programme will build maternal and infant community hubs in China’s rural and underdeveloped communities, and will include exchange and teaching programmes to help give local health workers, obstetrical and paediatric doctors, and nurses in rural areas new opportunities to learn best practices in healthcare.

    Fonterra has been the biggest exporter of milkpowder to China for 20 years and Mr Ferrier said it was strongly committed: “We are part of Chinese society”.

    Sanlu was one of 22 companies which had its milk poisoned by melamine and because it is seen as a Chinese problem, Fonterra’s reputation has not been affected. However, as a shareholder, I am pleased the company is making this donation to help the people and I hope that the best practices include the advice that breast milk is best for babies.


    Sanlu to be sold?

    27/09/2008

    NZPA notes media reports from Beijing which say Sanlu, in which Fonterra has a 43% stake may be sold to its rival Sanyuan Food Company:

    Sanlu group may be forced into bankruptcy and taken over by Sanyuan, the China Daily reported.

    Fonterra, the world’s biggest dairy trader, owns 43 percent of Shijiazhuang Sanlu Group Co., but to day told the Wall Street Journal that it hasn’t been approached about selling its stake.

    “No one has contacted our people on the board about a purchase,” Fonterra chief executive Andrew Ferrier said.

    . . . A  Sanyuan official, who refused to give her name, confirmed to the China Daily the company’s acquisition plans.

    Sanyuan has emerged untainted in the recent milk scandal. As a result, its share prices have soared and sales skyrocketed.

    This confirms yesterday’s post on Inquiring Mind.


    Fonterra learning the hard way

    27/09/2008

    Fonterra has learned a very expensive lesson in China, one of which is about trust in a culture where corruption is rife and saving face comes before safety.

    As chief executive Andrew Ferrier said, the company will never know  if it was mis-led by officials over the poisoned milk scandal.

    Defending Fonterra against claims that it should have gone public earlier, Mr Ferrier said the company thought government officials at all levels were aware of the problem in August. “When our people in China met with the New Zealand embassy we thought the Chinese central government was aware.

    “It could have been that people were fooling us at the local government level. We’ll never know.”

    A senior Chinese government official is now saying that the problem is under control. But can we believe that?

    This will not be the end of Fonterra’s investment in China but as company chair Henry van der Hayden says:

    “The lesson for us here is about having absolute control over our supply chain,” Mr van der Heyden said. “We have to make certain that we learn from this.”

    That is what they do in New Zealand and our reputation for safe milk on which consumers rely is built on that. That is what must happen in other countries and with other ocmpanies. PGG Wrightson which has dairy investments in Uruguay and Silver Fern Farms and Alliance Group which are talking about sourcing lambs from South America, must be equally rigorous.

     Macdoctor  says:

    Future investors must learn Fonterra’s lesson well. When you are dealing with an authoritarian society where face-saving is the norm, you must expect that mistakes and bad news will always be covered up. This is not to say that the Chinese are dishonest, far from it, they just have away of handling failure that confuses us. The type of transparency that you see in New Zealand, where even the Leader of the Opposition fronts up and apologises, is one that is unique to the West. Trade with China is certainly possible. Participation in joint ventures will require some work on both of our parts.

    When Ferrier was interviewd on Wednesday he said that he didn’t think it would be possible for the San Lu brand to recover. Inquiring Mind reports here  and here that San Lu is close to bankruptcy and that Sanyuan Foods which wasn’t hit by the poisoned milk is likely to acquire it.

    In a related story experts are struggling to work out safe levels of melamine in food in New Zealand.


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