Intermim CEO for Fonterra

August 15, 2018

Fonterra has announced the appointment of an interim CEO, Mike Hurrell, who will take over immediately:

Mr Hurrell is currently the Co-operative’s Chief Operating Officer, Farm Source – the unit responsible for working directly with the Co-operative’s farmer-owners. In that role, he is responsible for Fonterra’s global Co-operative farming strategy that includes farmer services and engagement, milk sourcing and the chain of 70 Farm Source™ rural retail stores throughout New Zealand. 

Mr Hurrell first joined Fonterra in the year 2000. His 18 years’ experience in the dairy industry has spanned four continents, including roles in Europe, the United States, Middle East, Africa and Russia. 

Fonterra Chairman John Monaghan says the Co-operative’s Board is clear that it is not best practice to have the Chairman and CEO stand down at the same time, but events have overtaken that decision. I have agreed with the Board that we will stop the global CEO search while we review the Co-operative’s current portfolio and direction.

“It’s important that we give ourselves the time to take stock of where we are as a Co-operative, breathe some fresh air into the business, then determine any changes that are needed.

The board has to know where it’s going before it works out who is best to lead it there.

“Appointing a new CEO is the most critical decision a Board will make. We will take all the time we need to find the right person.

“In the meantime, we need a new leader that can hit the ground running. Miles has great mana. He has a deep understanding of our business and has demonstrated his ability to manage large, complex business units in most of our global markets. Miles is well-respected both within our Co-operative and by our key global customers and wider stakeholders.

“Our CEO role requires intellect, energy and commitment. Miles brings that in spades.”

Mr Hurrell said he was excited by the challenge and as a proud New Zealander understood the responsibility that comes with the role.

“I’ve been part of the Co-operative for 18 years and understand that its true potential really comes down to its people.

“Theo leaves behind a talented leadership team that includes some of the best minds in global dairy. I’ve been privileged to be part of that group for the last four years and I’m totally confident that, by working as a team, we can deliver on the expectations New Zealand has of us.

“As a group, we haven’t always got everything right. Those lessons will be invaluable as we face up to challenges that are in front of us. . . 

The chair is right – appointing a CEO is the most critical decision for a board.

It is better to take time to get the appointment right, than to rush the process and get it wrong.


Business not Minister’s business

June 14, 2018

NZ First MP Shane Jones has stomped with his clod hoppers where he has no business to be again:

Regional Development Minister Shane Jones has climbed into the leadership of dairy giant Fonterra, calling for chairman John Wilson to follow chief executive Theo Spierings out the door.

Jones said he told the company it should stop being political and instead focus on its business.

Says the Minister who uses personal attacks instead of polite discourse and ought to be focusing on politics not meddling in business.

They should focus less on interfering in politics and more on justifying the money they’ve lost overseas. I believe that they have become disconnected from the farming community.”

Jones said he had suggested to Agriculture Minister Damien O’Connor whether it was time to restructure the dairy co-op, and singled out Wilson for special mention.

Doesn’t he know that the Dairy Industry Restructuring Act (DIRA), under which Fonterra was created, is under review already?

The leadership of Fonterra, I believe, starting with the chairman, is full of its own importance and has become disconnected.”

He said there was an absolute absence of accountability for the “enormous amounts of dough” that the current chairman had presided over.

This sounds very like a minister full of his own importance presiding over a billion dollar slush fund with little accountability.

The CEO has gone, well that’s only one party of the double-Dutch we’ve had to put up with in Fonterra over the last nine years. I thoroughly believe this … that as the CEO leaves Fonterra, the chairman should in quick order catch the next cab out of town.

Double-Dutch? Is this a xenophobic reference to the retiring CEO Theo Spierings and past chair Sir Henry van der Heyden who stepped down nearly a decade ago?

“I’ve been bloody disappointed that Fonterra, in my view, the leadership has not accepted that there’s a new Government and there is a new narrative and I’ve had a gutsful of them believing they are bigger then what they really are.” . .

Believing they’re bigger than they are? That’s rich coming from the party with far more power – and voter money – than its voter support at the election entitle it to.

This sort of tirade does nothing to reassure  businesses which are already very wary of the policies and directions of the government.:

The time has come for the Prime Minister to step in and discipline her Regional Economic Development Minister who repeatedly seeks publicity by attacking business leaders, National’s Regional Economic Development spokesperson Paul Goldsmith said today.

“Business confidence in New Zealand is plummeting and the reasons for that are mounting.

“The Government’s low growth policies like higher taxes and stronger unions are causing businesses to hire fewer people and invest less in growth and it has them concerned about the future of New Zealand and who can blame them?

“Because on top of that you have a loudmouth Regional Economic Development Minister who’s putting his own ego and need for publicity ahead of the interests of New Zealand.

“Shane Jones’ attacks on Fonterra’s leadership are the latest burp from a man who is fast losing any respect he once had.

“He says Fonterra’s leadership is ‘full of their own importance’.  That sounds like a more apt description of himself.

“He even added he’s ‘worried about the absolute absence of accountability for the enormous amounts of dough that the current Fonterrra chairman has presided over’.

“This is startling hypocrisy from the same man who defended his own region getting the lion’s share of funding from his billion-dollar Provincial Growth Fund by stating ‘to the winner goes the booty’.

“Well it’s not his booty and it’s clear Shane Jones has no idea what accountability means.

“This Government has decided to spend $3 billion over the next three years on regional economic development, including roundabouts and church restorations. It’s critical the responsible is up to the job and focused on doing his job well.

“At the moment, all he seems good for is attacking business leaders whenever a few days have gone by without some of the media coverage for which he craves.

A friend who was at the KPMG breakfast at which Jones launched his tirade said it was entirely inappropriate, and a very poor reflection on the MP and the government.

Fonterra is a co-operative. The performance of the company and its chair are the business of its shareholders not an MP.

There is some dissatisfaction and there are concerns but this season’s  milk price is the third highest since the company was formed.

Shareholders could well be more concerned about the MP who has no business interfering in their business than the chair’s performance.

So Jones’s loose lips could well strengthen the position of Wilson who is up for re-election this year.


Rural round-up

June 10, 2018

Lots of challenges for chief executive :

Terry Copeland says he is looking forward to his new challenge.

The New Zealand Young Farmers (NZYF) chief executive is set to take over as Federated Farmers’ new boss next month and admits dealing with the ongoing impact of the Mycoplasma bovis outbreak will be a ”baptism of fire”.

”I’ve got a real passion for wellness and mental health and I plan to bring that to my new role.

”Through the fallout from Mycoplasma bovis there will be a lot of communities in severe crisis, so making sure communities are supported will be hugely important . .

Waitotara Valley farmer Roger Pearce aims for more diversity – Laurel Stowell:

A farmer way up the Waitōtara Valley plans to get carbon credits from his poplars and is planting mānuka and using cattle to open up the ground for regenerating native bush.

Diversifying appeals to Roger Pearce, who has been farming in Makakaho Rd for four years. His land is becoming a patchwork of bush, closely planted poplars, mānuka, pasture and green feed crops.

“I like the idea, and the overall picture, where it’s going for the long term – not just intensively farming livestock,” he said . .

Hawkes Bay farmers warned of impact of synthetic meat

Farmers are being warned the meat industry they could go the same way as the wool industry if they ignore the threat of synthetic proteins.

The warning comes in the Hawke’s Bay Farming Benchmarking Review by accounting and advisory firm Crowe Horwath which saids repeated failure of the wool industry to respond to the threat of synthetic fibres was a “clear and serious warning” of potential problems in the red-meat sector. . .

Spierings’ Fonterra has created two new food categories :

Fonterra’s performance since formation in 2001, especially since listing in late 2012, has been the subject of much discussion around farm house kitchen tables, in supplier meetings in country halls, among Wellington regulators and in the media.

More than 10,000 supplying shareholders and several hundred investors in the Fonterra Shareholders’ Fund (FSF) have views on the giant’s performance ranging from laudatory to sceptical to dismissive.

Farmers Weekly has printed a range of views in a series called Fonterra’s Scorecard preparatory to the Government’s review of the dairy industry by the Ministry for Primary Industries this year.

Some conclusions are summarised here under subject headings and the report card is mixed. . .

 

Dreaded drought descends on paradise – Mal Peters:

The drought has its claws into the Peters farm after a run of good seasons but that does not make it any easier to manage while keeping yourself on top in the head department. In the last few years we had started on some long overdue capital improvements that now will have to be put on hold but the shock has been the rapid onset and time of year that has made the impact so severe.

My farm includes part of Wallangra Station that has some 120 years of rainfall records so it is interesting to look back on that admittedly short history to see what has happened. When looking at the November to April rainfall there are five standout crook times: 1902, 1919, 1965, 2007 and now this year. . . 

Drought is part of Australia’s DNA – John Carter:

Eastern Australia is in another major drought and the cattle industry is in big trouble. Mal Peters’ outstanding May column was a poignant description of what most cattlemen are enduring – very expensive or no feed, declining or no water and big price falls.

The stress is exacerbated by Indian and American inroads into our export markets and chicken into our domestic market. Drought is part of Australia’s DNA. No-one can predict when it will come to an area or when it will break. Talk of more money for weather forecasters to tell farmers when to plant their crops is Disneyland stuff-the next fortnight is all they can predict with any accuracy. . .

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Rural round-up

June 3, 2018

Already-stressed farmers will need to use all resources available to cope with the added impact of mycoplasma bovis. Their personal resilience faces a severe test – Daniel Tisch:

The mycoplasma bovis eradication programme underway will challenge farmer resilience. Resilience addresses the return to normal after a shock.

The shock felt by farmers from culling their herds has been widely reported. From what we know about resilience, this initial impact will be followed by a recovery period, in which the mental and emotional state of farmers will be affected for years.

The incidence of depression, suicide and other mental health conditions will rise.

An average of one farmer every other week commits suicide in New Zealand and this rate increases during stressful times such as a drought. International studies of farmers highlight their vulnerability. Many countries have programmes to support farmer resilience.  For example, US-lawmakers are currently discussing The Stress Act for farmers.  . . 

Just get on with it farmer says – Neal Wallace:

Leo and Maite Bensegues aren’t really interested in how Mycoplasma bovis arrived on their South Canterbury farm last August.

It meant the destruction of 950 cows and 222 yearlings but the Morven sharemilkers do not dwell on those dark days.

Instead the Argentinian who arrived in New Zealand in 2005 with $728 to his name focuses on the future and a day in late June when his farm will be declared free of the disease and he can start preparing for the calving of his recently bought 700-cow herd. . .

MPI answers questions:

When did Mycoplasma bovis arrive in New Zealand?

All the evidence we have is that Mycoplasma bovis arrived in New Zealand in late 2015 to early 2016. Investigations are ongoing.

Why do you think this?

We have two lots of evidence. A genetic clock and our tracking and tracing activity where we identify and test animals on farms that have received cattle or other risk items from Mycoplasma bovis positive farms, like milk for feeding calves.

What’s a genetic clock?

Since we discovered Mycoplasma bovis in NZ in July 2017 we have been gene sequencing the disease to identify its genetic fingerprint. . . 

Leisurely trip with cows allows rubbish pick-up – Jono Edwards:

Dairy farmers across the country braved the cold yesterday to embark on a yearly stock pilgrimage.

In some areas, they were concerned about the travel and mixing of stock that came with Gypsy Day in the era of Mycoplasma bovis.

Taieri dairy farmer Philip Wilson was not too worried about the  threat of the infection yesterday as he moved a small herd just 3km down the road. . . 

Wilson, Spierings argue valid comparisons, value-add – Hugh Stringleman:

For the Fonterra Scorecard series Farmers Weekly sought an interview with chairman John Wilson and chief executive Theo Spierings, now in his last year at the top of the world’s second-largest dairy processor and trader.

Aspects of Fonterra’s historical performance, Spiering’s strategies, the dairy industry review and Fonterra’s most-recent downgrade in earnings and dividends were discussed. It was their only joint interview with rural media during the past seven years. Hugh Stringleman reports. 

Fonterra’s performance

New Zealand dairy farmers who supply Fonterra now receive better payouts than their counterparts almost everywhere in the world, chairman John Wilson and chief executive Theo Spierings say. . .

New directors elected to Horticulture NZ board:

Horticulture New Zealand’s Board welcomes new director Bernadine Guilleux and re-elected director Mike Smith, after four well-qualified candidates contested two vacant roles on the Board.

Horticulture New Zealand’s President Julian Raine was advised of the results by Electionz, which ran an independent voting process for the Board.

Welcome Bay kiwifruit grower Mike Smith offered himself for re-election and Bernadine Guilleux, marketing manager at Balle Bros in Auckland, is a first-time candidate. . . 

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Rural round-up

April 2, 2018

Action call over any found to have illegally brought in ‘M.bovis’ – Sally Rae:

Consequences are needed if any farmers have put other farmers, animals and livelihoods at risk, let alone the New Zealand economy, DairyNZ chief executive Tim Mackle says.

Dr Mackle was responding to an announcement by the Ministry for Primary Industries yesterday that it had simultaneously executed search warrants at three locations as part of the Mycoplasma bovis investigation.

The New Zealand Herald reported there was growing speculation the bacterial cattle disease was introduced to New Zealand through illegally imported livestock drugs, and sources suggested Tuesday’s simultaneous searches were in Auckland and Southland. . .

Fonterra negotiating ‘roadblocks’ in China – Fran O’Sullivan:

Fonterra’s news that it was writing down its $774 million investment in Chinese infant formula company Beingmate by $405m inevitably dominated news headlines after the dairy co-operative announced its 2018 interim result to the NZX.

But that was eclipsed when chairman John Wilson announced the seven-year reign of his chief executive Theo Spierings was in its final phase.

It was a brutal press conference. . .

Food for thought: How to secure New Zealand’s food supply in the face of a changing climate – Tess Nicholl:

We take for granted the bounty on offer at our supermarkets, but destructive cyclones and the hottest month in 150 years are turning attention to how long New Zealand can provide fresh food for its growing population. Tess Nichol investigates.

On the outskirts of Dargaville, Andre de Bruin has been growing kumara for the past two decades.

He produces 40 hectares of the purple tuber annually, but last year his yield was halved thanks to what de Bruin calls a “perfect storm” — drought followed by unseasonal amounts of rain right before harvest.

“We had drought drought drought, then bam, floods,” he recalls. . .

Get the basics right – Sam Whitelock:

I come from a farming background and once I complete my rugby career I’ll be taking the lessons I’ve learnt from professional sport and applying them back on the farm. (Sam Whitelock, Farmstrong Ambassador)

Rugby has certainly taught me heaps about how to look after myself and handle pressure.

I reckon rugby and farming are really similar that way – there’s always targets to meet and results to achieve.

So how can you prepare for the ups and downs of it all? . .

Merino stud tour held in conjunction with awards – Yvonne O’Hara:

About 170 people took part in a two-day self-drive tour visiting eight merino studs in Central Otago earlier this month.

The tour was held in conjunction with the Otago Merino Association Awards, which were announced at a formal dinner in Alexandra on March 16.

The studs on the tour were Nine Mile Station, Malvern Downs, Earnscleugh Station, Matangi Station, Little Valley Station, Matarae Station, Stonehenge Station and Armidale Merino Stud.

Lunch was at Earnscleugh Station’s woolshed . .

 Art Basel Hong Kong 2018: Loro Piana’s cloud-like “The Gift of Kings” exhibition 590 panels of the world’s finest wool make for a jubilant immersive experience   – Alessandro De Toni:

In conjunction with Art Basel Hong Kong, Loro Piana—one of the world’s most prestigious cashmere and luxury fabric manufacturers—pays homage to its most renowned material known as The Gift of Kings.

It’s quite a bold name but it represents an incredibly fine, feather-light and rare wool sourced by Loro Piana through a 30-year-long collaboration with a selection of Merino sheep breeders in Australia and New Zealand. This material, measuring only 12 microns (one thousandth of a millimeter), is far finer than cashmere and only available in very limited quantities, meaning it’s quite extraordinary that it was used as the principal source material for this installation.


Rural round-up

March 23, 2018

Gore couple win top sharemilking award :

Gore couple Simon and Hilary Vallely have been named share farmers of the year in the Southland-Otago Dairy Industry Awards.
The awards function was held last night at Bill Richardson Transport World in Invercargill.

Mr and Mrs Vallely, both 31, are 50:50 sharemilking 475 cows on David and Valerie Stafford’s 160ha farm.

They believed strong relationships with all people they dealt with were the key to their successful business. . .

Departing Fonterra chief executive has taken the company forward – Christine McKay:

Fonterra’s departing chief executive Theo Spierings has been a strong leader, Tararua Federated Farmer’s president Neil Filer says.

Mr Filer, who is also the Tararua group’s dairy spokesman, told the Dannevirke News Spierings had moved Fonterra to a value-added space, which was good for dairy farmers.

“He’s done a good job since he began,” Filer said.

Spierings has not named a date for his departure after seven years, but Fonterra board chairman John Wilson said he had made an “extraordinary” contribution while in the job. . . 

Kiwi butchers finish second on world stage:

New Zealand’s butchery team, The Pure South Sharp Blacks, just missed out on being crowned world champions yesterday after finishing runners up at the World Butchers’ Challenge in Belfast, Northern Ireland.

Team Ireland, the host nation took the top spot in a tense battle of the butchers with the Aussies – the Australian Steelers – finishing third… to the delight of many this side of the ditch.

Website to find workers praised:

Demand for horticulture workers is higher than the number of people available, Horticulture New Zealand chief executive Mike Chapman says.

He applauded the Work The Seasons website launched on Friday by the Ministry of Social Development. It gave growers access to more workers and gave people looking for work the chance to see what great opportunities existed in horticulture, ”not only for seasonal work, but also for permanent work and a lasting career”, Mr Chapman said. . 

 

Telemedicine – keeping Kiwis well closer to home:

Dr Ben Wheeler is running remote diabetes clinics for rural Otago families, saving them the long trip to Dunedin.

Type one diabetes is the second most common chronic condition in children, after asthma. In my region, from South Canterbury to Stewart Island, there are up to 200 children and young people with diabetes. Being a kid with diabetes is no fun. You have to be careful about what you eat, put up with finger prick blood tests and injections every day, and often wear a bulky insulin pump under your clothes. When I first started working here, children with diabetes in Otago had to make the trip to Dunedin every three months, sometimes more often, to see me for their clinic. For some families that meant a round trip of up to nine hours. It meant mum and dad having to take a day off work – sometimes two days, if they had to stay overnight. Often brothers and sisters would need to come too, with everyone missing school – all this for a half-hour consultation. . . 

When the death of a family farm leads to suicide -Corey Kilgannon:

Fred Morgan was already deep in debt from rebuilding his milking barn after a fire when milk prices plunged in 2015, setting off an economic drought that is now entering its fourth year — the worst in recent memory for dairy farmers in New York State.

Mr. Morgan, 50, saw no way to save the dairy farm in central New York State that he took over as a teenager from his ailing father and ran with his wife, Judy, and their son, Cody.

With the farm operating at a loss and facing foreclosure, Mr. Morgan believed his only solution was his $150,000 life insurance policy. He said he planned on killing himself so his family could receive the payout.

“I’d sacrifice my life so my family could keep the farm,” Mr. Morgan said. His wife persuaded him otherwise. . .

Those who work ina cares not hours and those who feed others before themselves . . .thank you. #NationalAgDay


Was he pushed?

March 21, 2018

Fonterra has a strangely worded media release announcing it’s seeking a new CEO:

Fonterra Co-operative Group Limited (Fonterra) today announced that, as part of a planned CEO succession process, the Fonterra Board and its CEO Theo Spierings have agreed that Mr Spierings will leave his role later this year.

Fonterra says its Board and Mr Spierings had formally commenced succession discussions last year. As a result of that, the Fonterra Board initiated international searches in November last year to identify potential candidates and was now shortlisting candidates.

Fonterra Chairman John Wilson says the Board was taking the decision to bring forward the announcement, which the Board was expecting to make in April, to avoid speculation.

“It is not yet clear exactly when any appointment for Theo’s replacement will be made, but it is absolutely clear that Theo will continue in the meantime to drive the Co-operative’s strategy and business, with special emphasis on China.

“The Board and Theo are committed to a high-quality transition to a new CEO and when we have more information in regards to timing we will let our farmers and the wider market know. Until then it is business as usual with the focus on driving returns to our farmers and unitholders.

“We envisage that even after the announcement of our new CEO, Theo will be involved in an advisory role so that we make best use of his knowledge and expertise during the transition,” says Mr Wilson.

Mr Spierings says that he has been proud to have led Fonterra as CEO for seven years as the Co-operative has established a strong demand-led strategy and oriented itself to become innovative and sustainable.

“It is now time for a new CEO who can lead the Co-operative through this next phase. The time is right for the Co-operative and that is important to me and to the Board.

“It is also the right time for me personally. I look forward to new challenges, but right now my focus is on Fonterra. That will be the case until I finish with the Co-operative.”

The usual wording would be that a CEO was resigning and a replacement was being sought.

The convoluted wording makes it sound like he was pushed.

Whether or not he was, I hope that the new CEO brings a culture change with better communication, including a willingness to front the media.

Last week Duncan Garner on the AM Show complained that no-one from Fonterra would come on the show.

It’s the second time I’ve heard Garner make that complaint and I can’t understand why Fonterra wouldn’t take up the opportunity to tell its story.


Front up Fonterra

December 14, 2017

On the AM Show this morning Duncan Garner criticised Fonterra for not fronting up.

The company had been asked to come on the show to talk about the price of butter.

No-one would.

I don’t understand why.

Explaining the high price of butter is simple.

After years of being advised to eat less fat in general and less butter in particular, the advice has changed. Butter is no longer the bad diet bogey it was, people are discovering, or rediscovering, the joy of it and demand has risen faster than supply.

How hard would it have been for someone from the company to explain that?

This isn’t the first time Fonterra wouldn’t front the media. If the company doesn’t want all the good its advertising campaign is doing to be undone it must be the last.

Chief executive Theo Spierings is paid an eye watering amount to run the company.

I don’t have a problem with that but I do have a problem if he isn’t doing his job properly. Part of a CE’s job is to front the media or, if he’s not the right person to do so, to find that person and make sure s/he does.

Fonterra is running a very good advertising campaign which shows the interconnections between everyone who contributes to making the company work and work well and the economic and social benefits of that.

It’s not just about converting grass to milk and processing and selling it. It’s about all the people who use the milk and the ones who do the work between the paddock and plate, glass or cup who enable them to do so.

It’s a really good story but there is a huge risk that good will be undone if the company turns down requests to front the media.


Fonterra forecast down, shares up

December 2, 2017

Fonterra has dropped its forecast payout after being ordered to pay Danone $183 million in compensation:

Fonterra Cooperative Group has cut its forecast for 2018 earnings per share after an arbitration tribunal in Singapore ruled it must pay 105 million euros ($183 million) to Danone in the wake of 2013’s whey protein recall.

The award for recall costs suffered by Danone comes after the French company launched arbitration proceedings in Singapore and a legal suit in the New Zealand High Court, estimating the cost of recalling the whey protein concentrate to be about 350 million euros. At the time, Fonterra said it expected any court action would show it wasn’t liable under the contract. The recall was recognised as a $14 million contingent liability in its accounts.

In 2013, Fonterra quarantined several batches of whey protein concentrate amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria. The whey protein was ultimately cleared as a false alarm. Fonterra cut deals with seven of the eight customers affected.

“We are disappointed that the arbitration tribunal did not fully recognise the terms of our supply agreement with Danone, including the agreed limitations of liability, which was the basis on which we had agreed to do business,” Fonterra chief executive Theo Spierings said in a statement. Fonterra was “reviewing the tribunal’s findings closely, but recognised that there was likely to be limited options for challenging the decision of an international arbitration.”

Fonterra had assessed the potential financial implications of the decision and made “a prudent decision to revise its forecast earnings per share range for the 2017/18 financial year to 35 to 45 cents, down from 45 to 55 cents,” the company said. The decision wouldn’t impact the company’s forecast farmgate milk price, currently at $6.75 per kilogram of milk solids.

“Fonterra is in a strong financial position and is able to meet the recall costs,” Spierings said. As at July 31, Fonterra had $3.8 billion in undrawn lines of credit and $393 million of cash.

Earlier today, Danone said it “welcomes this arbitration decision as a guarantee that the lessons from the crisis will not be forgotten.” The arbitration “underscores the merit of its legal actions against Fonterra, including to champion the highest standards of food safety across the industry,” it said. Food companies and their suppliers “can only work together through a solid relationship based on trust, transparency, and accountability. Danone will continue to build that relationship with its suppliers across the world.” Danone’s New Zealand subsidiary Danone Nutricia ceased doing business with Fonterra in the wake of the dispute.

Fonterra had its shareholders’ fund units and listed bonds halted from trading today ahead of a media conference at 3pm in Auckland.

“While there was never any risk to the public, we have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems,” Spierings said. “We operate in a fast-changing and complex industry, and will always prioritise food safety and quality in our commitment to be the world’s most trusted source of dairy nutrition.”

Since Danone ended its supply contract with Fonterra, it’s sourced product from Synlait Milk and other manufacturers and bought two Kiwi dairy processing companies, Sutton Group and Gardians, with the latter providing access to milk supply from 18 farms owned by Grant Paterson of Dunedin. 

While the forecast payout has dropped, Fonterra shares gained in price:

Fonterra Shareholders Fund units gained 0.6 percent to $6.40. . . 

The award for recall costs suffered by Danone comes after the French company launched arbitration proceedings in Singapore and a legal suit in the New Zealand High Court, estimating the cost of recalling the whey protein concentrate to be about 350 million euros. At the time, Fonterra said it expected any court action would show it wasn’t liable under the contract. The recall was recognised as a $14 million contingent liability in its accounts.

Fonterra had assessed the potential financial implications of the decision and made “a prudent decision to revise its forecast earnings per share range for the 2017/18 financial year to 35 to 45 cents, down from 45 to 55 cents,” the company said. The decision wouldn’t impact the company’s forecast farmgate milk price, currently at $6.75 per kilogram of milk solids.

“In the share price you’ve seen an element of relief, albeit on low volume” said Rickey Ward, NZ equity manager at JBWere. “There’s an issue that had been overhanging the company, which could be enormously material, which has been resolved, and it doesn’t appear there’s any desire to pursue recourse on this.”

“It’s full and final, it provides clarity and therefore investors can start to analyse or take a view of the company on fundamentals now, rather than this issue that’s been lurking in the background,” Ward said. “It could have been quite stressful for them if it had been at the upper end of what some people were suggesting. The company would have been capable of addressing it, but they would have had to find a way of addressing it which might not have pleased the unitholders in the shareholders’ fund.”

The market must have been expecting worse news.

Farmers have been anticipating a drop in the farmgate milk price in the wake of price falls in several successive GlobalDairyTrade auctions. However, it’s the earnings per share forecast which has been lowered, not the farmgate milk price.


Rural round-up

November 21, 2017

Wool gains ‘dream come true’ – Sally Rae:

Watching the volume of wool growing for Lanaco’s healthcare products and seeing lambs being born from specifically bred genetics is a ‘‘dream come true’’ for Nick Davenport.

Mr Davenport is chief executive and founder of the Auckland-based company, previously known as Texus  Fibre, which specialises in fibre innovation and developing functional materials derived from wool.

Wool from sheep developed by Wanaka man Andy Ramsden, from the Dohne, Cheviot and Finn breeds, and trademarked as the Astino breed, is used in healthcare products. . . 

Family’s top two places a show first – Sally Rae:

‘‘Not a bad show’’ is how Will Gibson dryly describes his family’s record-setting feats at last week’s Canterbury A&P Show in Christchurch.The Gibson family, from Middlemarch, won the prestigious Senior Meat and Wool Cup with their yearling supreme champion Hereford bull and were runners-up with their 2-year-old Santa Gertrudis cow with calf at foot.

It was the first time in the show’s history the same exhibitor has won the top two placings and it was well-deserved recognition for a family who work hard, are passionate about their livestock and also about exhibiting at A&P shows.

The yearling bull Foulden Hill Mustang was unbeaten in his classes over the two days, both in the Hereford and all-breeds classes, and he also won the Junior Meat and Wool Cup. . . 

Alternative proteins – on the verge of  mainstream:

Alternative proteins are on the verge of becoming mainstream and ‘stealing’ growth from traditional meat products as they play a growing role in meeting consumer needs and preferences, according to a recently-released global research paper.

The report, Watch out…or they will steal your growth by agribusiness banking specialist Rabobank, examines why alternative proteins – including plant-based meat substitutes, emerging insect or algae-based products and lab-grown meat products – are starting to successfully compete for the “centre of the plate”.

Report author, Rabobank global sector strategist for Animal Protein Justin Sherrard, says it is the ‘growth’ – rather than the current market size – of alternative proteins that is of greatest significance. . . 

Predator Free farm award:

Farmers will be recognised for their part in the nationwide movement of Predator Free New Zealand when a new Predator Free Farm Award will be presented next year as part of the Ballance Farm Environment Awards.

Sponsored by Predator Free NZ Trust and the New Zealand Farm Environment Trust, the new award will acknowledge the efforts of farmers who have put in place systems to effectively manage and monitor predators including possums, rats, feral cats, ferrets, weasels and stoats.

The award will be given to farmers who have been successful in controlling predators and are likely to have wider native biodiversity and habitat enhancement programmes in place.

Chair of Predator Free NZ Trust, Sir Rob Fenwick, said “farmers manage a significant proportion of the New Zealand landscape so they are vital in the drive to make New Zealand predator free.” . . 

Beef + Lamb New Zealand extends its support of B+LNZ Genetics:

After four years of operation and a series of successful milestones, Beef + Lamb New Zealand (B+LNZ) has extended its support of wholly-owned subsidiary B+LNZ Genetics beyond its initial five-year funding programme.

B+LNZ Genetics was established in 2013 to consolidate farmer investment in New Zealand’s sheep and beef genetics research and innovation into a single entity. Its programme was forecast to generate $742m of benefits over 10 years, but that figure has since been reviewed upwards, to $947m, or $7,890 per annum per sheep and beef farm. With rising costs this helps keep farmers competitive. . . 

Butter at record $5.67 a block :

Rising dairy prices have pushed food prices up 2.7 percent in the year to October 2017, Stats NZ said today. This followed a 3.0 percent increase in the year to September 2017.

Butter prices led the way again – up 62 percent from the same time last year. Milk and cheese prices also increased (up 7.5 and 12 percent respectively) and had large contributions to the increase in food prices seen in the year to October 2017.

“Dairy products are very widely used inputs in a number of food items,” consumers price index manager Matthew Haigh said. “The effects of price rises flow on to products such as takeaway biscuits, buns, cakes and coffee, and eating out for lunch and dinner, all of which saw increases in the year to October 2017.” . . 

Global Dairy Platform announces new chairman:

Global Dairy Platform (GDP) has appointed Fonterra Chief Executive Officer, Theo Spierings, as GDP chairman, effective November 16, 2017.

Mr. Spierings says he is pleased to be taking on the role and playing a part in maximizing the contribution dairy can make to the world.

“More than ever, people are turning to dairy for nutritional security and sustainable food and every day we see the good that dairy can do. . . 

 


Rural round-up

November 3, 2017

The big dry – Waimea Water:

The 2001 drought was the most severe drought our region experienced in 60 years. Different phrases were used to describe it, including a shortage or a crisis. Early on it was ‘water fears.’ In the end, the drought stuck and it became known as the ‘Big Dry’ and it affected everyone in the region from Nelson to Richmond to Motueka to Golden Bay.

Riverbeds dried up. Saltwater threatened the bores in the lower Waimea River. Stories about the scarcity of rain appeared almost daily in newspapers. Councils met to assess the water supply risks and the rationing requirements. Green pastures were brown with no grass in sight. Dairy farm stock had to be dried off months early, with cattle and sheep sold below cost to cover lost revenue. Permitted users, including irrigators across the Waimea Plains, had been reduced to 40 percent of their allowed take.  . .

No Waimea dam: I’m out, says long-time market gardener Mark O’Connor – Cherie Sivignon:

For four generations, Mark O’Connor’s family have been on the Waimea Plains. For the past three, they’ve been growing vegetables.

But the Appleby Fresh managing director says if there’s no Waimea dam, he will consider subdividing some of the land and selling up.

“We actually had a meeting the other day and said what are we going to do if we don’t get the dam and I said: ‘I’m out of it; it’s too hard to farm without having water’,” he said. . . 

Fonterra to invest $100m in Australia after hitting full milk processing capacityFonterra sees Aus opportunities – Gerard Hutching:

Fonterra has unveiled plans to invest $100 million immediately into its Australian business in a major expansion plan.

It is also looking into the possibility of its Australian operation becoming a co-operative.

Chief executive Theo Spierings told the co-operative’s annual general meeting in Hawera on Thursday that Fonterra’s reputation had climbed from 9th to 5th in the RepZ survey and had “changed the minds of 1.5 million New Zealanders.” . . 

We’ve got the bull by the udder – John King:

Here’s a quiz for morning smoko. According to modern grazing practice, where’s best on the curve in the illustration for the following:

  • · Maximum livestock growth?
  • · Maximum pasture longevity?
  • · Maximum soil development and structure?

Many farmers and all agricultural professionals will know where’s best for growing livestock, a few less will know where’s best for pasture longevity, and most wouldn’t even consider where’s best for soil, let alone there might be two places. That’s due to the prevailing culture and training railroading what we believe is normal – focusing on single goals.John King

Farmer Fast Five – Richard Power – Claire Inkson:

The Farmers Fast Five : Where we ask a farmer five quick questions about farming, and what agriculture means to them. Today we talk to Hawarden Proud Farmer Richard Power, who with his wife Mez, won the Romney section of this years Ewe Hogget Competition.

How long have you been farmer?

I am a third generation farmer.  I was bought up on our stud sheep and beef farm where from a young age was taught how to handle and judge stock.  After a stint at Lincoln I went lamb drafting for 5 years.  Travelling around so many different farms gave me a great insight into different breeds and ways of farming.  I carried on drafting for another 3 years after taking on the home farm with my wife in 1990 and changing to a commercial operation.

What sort of Farming are you involved in?

We are involved in a traditional dryland sheep/beef and crop operation, concentrating on early lamb production. All our lambs are gone by Christmas, and what doesn’t go prime is sold store.  On a normal season the split would be 80% sheep and the beef/crop sharing 10% each.  Beef cattle of any type are traded from Autumn to Spring and Barley is grown for a local farmer. . . 

Major deer shed upgrade underway:

Most deer farmers are upgrading their deer sheds so that velvet is harvested, handled, stored and transported in a clean environment.John Tacon, quality assurance manager for Deer Industry NZ (DINZ), says the regulatory bottom line is that all sheds must have a “clean zone” – a designated area where velvet antler is removed, handled and frozen. In this zone, all contact surfaces must be washable and clean prior to velvet removal and handling. 

“As soon as practicable after harvesting, but within 2 hours, velvet also needs to be placed in a velvet-only freezer capable of freezing to at least minus 15 deg C.” 

At some time in the future he expects standards could well be “ramped up, but it’s a good starting point”. . . 

Autumn – Ben Eagle:

 Today I began the first of what will be many bramble bashing (or should that be obliterating) sessions throughout the autumn/winter as I try to get on top of the scrub encroaching on some of the farm’s stewardship plots. The sky seemed to be missing today, a great grey and white canvas only intermittently marked by the odd passing pheasant or pigeon, the former unable to get much lift to make sufficient impact upon the bleak sky as I looked upward and across. Pheasants annoy me, with their loud cackling call, their pompous plumage and their inability to fly properly, but I know I shouldn’t hold it against them. As I write this post now I hear them outside. Something has spooked them and they are calling out, confused and terrified of the world. Who can blame them I suppose when you primary reason for existing so far as human kind is concerned is to be shot. . . 


Rural round-up

October 7, 2017

Time to end cartoon days for meat industry – Pam Tipa:

Meat Industry veteran Sir Graeme Harrison reckons the sector was summed up by a 1994 cartoon captioned, ‘we can’t see, we don’t hear and we don’t talk’.

“I think that is pretty typical of a lot of New Zealand’s export sector to be frank,” the ANZCO Foods Ltd founder and chairman told the recent ExportNZ conference in Auckland.

“Really what we’ve got to do is join hands and collaborate. That is certainly what ANZCO has done in its business relationships around the world.” . . 

Commodities and cost savings drive Fonterra’s performance – Keith Woodford:

Fonterra’s 2017 financial performance was a solid result, despite profits dropping 11 percent to $745 million. The main cause of the drop was the higher farm-gate price of milk supplied by its farmers, which is a cost to corporate Fonterra.

This farm-gate price is based on commodity returns and is largely beyond the control of Fonterra. The decline in profit would have been much greater if it were not for a six percent reduction in operating costs.

It is these operating cost savings which have fuelled the more than $5 million bonus payments this year to CEO Theo Spierings. These savings can be directly attributed to the so-called V3 strategy which was Spierings’ baby. . . 

Fonterra’s payout may be at risk after global dairy prices undershoot – Rebecca Howard:

(BusinessDesk) – Dairy prices undershot expectations in the overnight auction and some economists say it points to weaker demand and stronger supply, threatening Fonterra Cooperative Group’s forecast payout.

The NZX Dairy Derivatives market pointed to around a 5 percent lift but instead the GDT price index – which covers a variety of products and contract periods – fell 2.4 percent from the previous auction two weeks ago to US$3,223.

“The fall was a surprise and must be telling us something about demand that the market did not already know,” said Westpac Banking Corp chief economist Dominick Stephens. . . 

Meet the  new King of the North – Pam Tipa:

New National MP-elect for Northland Matt King, who took the seat off Winston Peters, is not taking anything for granted until the special votes are counted.

Although he is about 1300 votes ahead and has been told that is a safe margin, he will wait and see before making any big decisions.

They will include whether to lease out the 283ha beef farm at Okaihau that he bought only six months ago from his father, having leased it himself for the past 10 years. He has lived on the farm most of his life.

But he says there is no way he could give his best to his new role as an MP and continue to run the farm himself. . . 

Farm Plan focus in Central Hawke’s Bay:

Hawkes Bay Regional Council’s land advisors met with 34 Farm Plan providers in Waipawa on Wednesday to tackle the challenge of delivering 1,100 Central HB farm plans by 31 May 2018.

The regional council’s Tukituki Plan will lead to better water quality in the Tukituki catchment through land use practice improvements and landowner-led innovation. At this stage, the pressure is on individual landowners to commit to work with Farm Plan providers. The Farm Plans are not a solution in themselves, but spell out the adjustments to make to reduce individual farm impacts on the environment. . . 


Fonterra aims to restore 50 freshwater catchments

July 18, 2017

Fonterra CEO, Theo Spierings, has announced an ambition to restore 50 freshwater catchments, signalling the Co-op’s desire to take a leading role in improving New Zealand’s waterways.

“We acknowledge we have an important role to play in addressing water quality in New Zealand. Kiwis want swimmable waterways and that’s an aspiration we share. We’ll work with local communities to improve the quality of our streams and rivers,” said Spierings.

Fonterra launched its 10 year Living Water partnership with the Department of Conservation in 2013, with the aim of achieving sustainable dairying in healthy freshwater ecosystems. The programme focuses on five catchments and aims to improve natural habitats, and freshwater outcomes.

“Living Water has taught us a huge amount and we are making a significant impact on the initial regions. Now we want to amplify those results with the launch of a new initiative that will target 50 catchments.

“Our immediate focus will be on working with communities, Government and key partners to identify the catchments and develop a strategic framework for the programme. This is a major undertaking and we need to get it right, but we are committed to making substantial progress,” said Spierings.

Spierings made the announcement at the annual meeting of the New Zealand Sustainable Business Council held in Auckland yesterday. The Council’s Executive Director, Abbie Reynolds, said she was delighted Fonterra was making a significant commitment to improve water quality.

“The business case for sustainability is clear and it’s pleasing that a growing number of organisations are making robust commitments to improving New Zealand society and the environment. It is great that Fonterra is making an ambitious commitment, which is both bold and restorative,” Reynolds concluded.

Water degradation has occurred over many years and has multiple causes.

Intensive dairying has been part of the problem but the industry has done a lot to repair the damage and reduce its environmental footprint.

Niwa’s freshwater and estuaries chief scientist Dr John Quinn notes a significant improvement:

There has been a lot of improvement in dairy industry practice in the last 15 years. Dairy shed effluent management has improved and is more professional, and the majority of streams on dairy farms are now fenced to exclude cows. Things like the Farm Enviro Walk Toolkit and Sustainable Dairying Water Accord have increased adoption of a range of good environmental practices. These advances have been industry-led, rather than driven by government rules.” . . 

More than 97% of streams running through dairy farms are now fenced, so cows are out of waterways. Waterways are still receiving E. coli and Campylobacter from other unfenced stock and wild animals. They’re also getting microbial pathogens from land runoff when it rains. A 2005 NIWA study found that rain can wash a million to a billion E. coli bacterium per square metre of hillside into streams.

Riparian strips can help. These are the areas where plants grow alongside streams. They trap and absorb nutrients and microbes, including E. coli, in surface water. In the best conditions, riparian strips can remove at least 60% of nitrogen and 65% of phosphorus from runoff and groundwater.

There’s even more to riparian strips than the benefits to water quality. Trees holds together river banks, which stabilises them as habitats for insects and prevents silting and cloudy water that disturbs fish. The shade of trees creates cooler and more humid conditions, which insects need, and prevents over-growth of plants in the stream. Their branches and leaf litter provides direct habitat and food for many of the insects that like riverside conditions for only parts of their life stages, particularly larval, before moving to other habitats.

It is good to have this acknowledgement of the work that’s been done and the positive impact it’s having.

There’s still a lot more to do and Fonterra’s initiative will make a major contribution to it.


Fonterra forecast payout up 75c to $6

November 18, 2016

Welcome news:

Fonterra Co-operative Group Limited today increased its 2016/17 forecast Farmgate Milk Price by 75 cents to $6.00 per kgMS.

When combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be $6.50 to $6.60 before retentions.

Chairman John Wilson said the increase reflects improvements in pricing since September, following the gradual rebalancing of global supply and demand.

“We’ve seen falling production in the major exporting regions, particularly Europe and Australia, and an unprecedented decline in New Zealand milk supply due to wetter than normal spring conditions across most regions. On balance, demand continues to be firm. As a result there has been a steady improvement in global dairy commodity prices and this is reflected in the improved forecast.

“We are very mindful that farm incomes will be affected this year because of lower milk production so we will be doing everything possible to build on our good start to the financial year and deliver the highest possible total payout to our farmers,” said Mr Wilson.

First Quarter Performance Update

Fonterra’s first quarter revenue of $3.8 billion is up six per cent on the same period last year. Sales volumes are up two per cent to 4.9 billion litres liquid milk equivalent (LME), while the gross margin of 22 per cent remains largely unchanged.

Chief Executive Theo Spierings said the first quarter revenue gains reflected broad-based volume and margin growth across the business, and an ongoing focus on cost controls.

“Our operating expenses have reduced by two per cent to $621 million and we continue to keep a close rein on them, in line with the financial discipline shown last year,” he said.

The Co-operative has moved an additional 128 million litres LME into higher-value consumer and foodservice products compared with the same period last year.

“The consumer and foodservice business achieved an improved gross margin of 31 per cent, up from 28 per cent. This reflects the increasing strength of our brands in key markets and our focus on chef-led solutions in foodservice.”

Mr Spierings said while the first quarter performance was pleasing, the Co-operative’s earnings face emerging head-winds for the remainder of the financial year.

“Our current milk collection forecast is 1,460 million kilograms of milk solids (kgMS), down seven per cent on last season, and this is constraining sales.

“In addition there is a potential impact from the price of Milk Price reference products, such as whole milk powder, rising faster than non-reference products.”

Mr Spierings said that, given the Co-operative’s stronger sales performance and lower production volumes, it continues to monitor its inventory and contracted sales position closely.

Chairman John Wilson said the Co-operative has had a strong start to the year.

“The unchanged earnings guidance range of 50 to 60 cents took into account the fact that a higher milk price had the potential to influence margins across the business. However, we do expect this volatility to continue which could impact both milk price and earnings guidance. We will keep our farmers and investors updated as we move through the year,” he said. . .

The wet spring has led to lower production over most of the country but if the forecast is realised, all but the least efficient farms will be safely above break-even.

Debt repayment will be a priority on most farms, but this level of payout will enable more spending on businesses that service and supply farms.


Rural round-up

September 23, 2016

Farmers must ‘lock in the gains’ as milk price lifts:

DairyNZ is encouraging farmers to lock in the gains achieved in the past two seasons, as a pasture-first farm system will continue to provide payback as the milk price rises.

Chief executive Tim Mackle says the increase to $5.25 per kg MS for the forecast 2016/17 Fonterra Farmgate milk price is terrific news for dairy farmers.

“This brings many farm businesses to around the 2016/17 break-even milk price of $5.05 per kg MS, once retrospective payments and dividends are taken into account. This means fewer farmers will need to borrow extra funds this season,” says Tim.

“Retrospective payments for next year have also been boosted by 20-25 cents in this announcement, to over $1 per kg MS. . . 

New funding for Mayfield Hinds irrigation scheme:

Primary Industries Minister Nathan Guy has welcomed $345,000 in new funding to investigate expansion of the Mayfield Hinds irrigation scheme in mid-Canterbury.

The funding comes from the Ministry for Primary Industries’ Irrigation Acceleration Fund (IAF)and will look at the feasibility of increasing the irrigated area of the current scheme by 4,500 hectare through piped extensions.

“Storing alpine water to use in dry times is crucial for rural communities to thrive, especially as the climate becomes more variable,” says Mr Guy.

“Well planned and managed irrigation schemes are good for rural economies and the environment. . . 

Fonterra says China well-poised for growth, regulatory changes will see 1800 brands disappear – Fiona Rotherham

(BusinessDesk) – Fonterra Cooperative Group chief executive Theo Spierings says legislation will mean drastic changes in the Chinese infant formula market with the removal of between 1800 and 2000 brands in the next 15 to 18 months.

Regulatory changes require each entity to have only three brands and three different recipes of infant formula in a bid to crack down on the grey market and allay consumers’ food safety concerns by reducing fake formula.

Spierings said Fonterra was well-positioned in every segment in China where it is already the global market leader for ingredients such as whole milk powder but a lot of things have changed in the past few years including a shift to sales from mother and baby shops to e-commerce. . . 

NZX milk futures fall from record after GDT, still above Fonterra payout forecast – Tina Morrison

(BusinessDesk) – New Zealand milk price futures have fallen in the wake of the latest GlobalDairyTrade auction, having reached a record in the run-up to this week’s sale, but remain above the payout level forecast by most of the country’s milk processors.

The NZX milk futures contract for the 2016/17 season hit a record $5.65 per kilogram of milk solids ahead of the GDT overnight on Tuesday, and recently traded at $5.50/kgMS. That’s still above the base milk price forecast by the country’s major milk processors, with Fonterra Cooperative Group this week updating its forecast to $5.25/kgMS, while Synlait Milk’s is at $5/kgMS, Westland Milk Products at $4.75-to-$5.15/kgMS, Miraka at $4.55-to-$4.80/kgMS, and Open Country Dairy at $4.60-to-$4.90/kgMS. Tatua sits above the futures with a current forecast of $5.50-to-$6/kgMS while Oceania Dairy didn’t immediately respond to a request for its forecast. . . 

NZ Merino and Silver Fern Farms set out new path for Silere:

The New Zealand Merino Company (NZM) and Silver Fern Farms have reached agreement for NZM to take 100 per cent ownership of Alpine Origin Merino Limited, previously owned jointly.

Alpine Origin Merino Limited was established 5 years ago as a joint venture between NZM and Silver Fern Farms to own the SILERE alpine origin merino brand and to fund the development and marketing of the SILERE merino meat range. Under the agreement NZM becomes the sole shareholder in Alpine Origin Merino Limited.

NZM Chief Executive John Brakenridge stated that “when we set out we needed to prove merino meat could be differentiated as a luxury eating experience and value created in market could be delivered to grower suppliers. . . 

Kiwi moves to Pitt island, with no electricity or phones, for love – Ryan Bridge:

There’s no love without sacrifice, right? How far would you be willing to go to make it work?

Story met Amy Podjursky during our flight to the Chatham Islands, and discovered she was moving hundreds of kilometres to a remote island in the name of love.

There’s no electricity or cellphones on Pitt Island – and there’s only around 50 people who actually live there. It’s quite uninhabited and it’s the eastern-most point of New Zealand. . . 

 

Image may contain: text, outdoor and nature

Not all superheroes wear capes. Some wear boots and know how to use a crock pot – PinkTractor.com


Value-add shows value of co-operative

September 22, 2016

Fonterra has announced a 65% increase in net profit after tax to $834 million which the company says reflects a stronger business despite ongoing challenges in global dairy markets.

Highlights:

Sales volume increased 4% to 23.7 billion Liquid Milk Equivalents (LME)

· Revenue $17.2 billion, down 9%

· Normalised EBIT $1.4 billion, up 39%

· Net profit after tax $834 million, up 65%

· Return on capital 12.4%, up from 8.9%

· Ingredients inventories down 25%

· Gearing ratio reduced to 44.3% from 49.7%

· Debt reduced by $1.6 billion to $5.5 billion

· Earnings per share 51 cents

· Cash Payout $4.30

– Farmgate Milk Price $3.90 per kgMS

– Dividend of 40 cents per share

 . . . Chairman John Wilson said that the 2015/16 season had been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

“Our Co-operative has responded. We continued with the significant and necessary changes we began in the business over three years ago to support our strategy and its priorities, and worked hard to return every possible cent of value back to our farmers.

“Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially through speciality ingredients and service offerings.

“Through increased earnings and continuing financial discipline we have increased the return on capital and strengthened our balance sheet by significantly reducing debt.

“We have done what we can to support our farmers with the Co-operative Support Loan, and early payment of dividends.

“After a period of deliberate and disciplined attention to the business, we have become a stronger Co-operative operationally, financially and in our mindset with a clear sense of direction and a structure which will support real momentum in our strategy going forward,” said Mr Wilson.

Mr Wilson said farmers’ decisions to reduce stocking rates and supplementary feeding to help lower costs resulted in milk collection across New Zealand for the 2015/16 season declining to 1,566 million kgMS, down three per cent on the previous season.

Strong volume and value growth

Chief Executive Theo Spierings said more volumes of milk sold at higher value is at the heart of Fonterra’s strategy.

“For our farmers, the promise is that we will make the most of their milk. We’re keeping that promise.

“We’ve seen the real strength of our ingredients business this year. The money our farmers have invested in stainless steel is giving us more choice, and we have matched production to the highest value customer demand. In a difficult market, we increased ingredients normalised EBIT this year by 24 per cent to $1,204 million.

“In consumer and foodservice, we converted an additional 380 million litres of liquid milk equivalents (LME) into higher returning products, bringing our total volumes in this business up from 4.5 billion LME to 4.9 billion. Increasing our consumer and foodservice volumes, and especially our foodservice growth, meant we increased our normalised EBIT in this business by 42 per cent to $580 million.

“Our results show that we continue to do what we said we would do right across the Co-op. We are single-minded about transforming our business to get the best results. We have cut our operating expenses, increased our free cash flow, reduced our working capital days, driven debt down, and reduced our capex and our gearing.

“All of this effort, combined with higher earnings and margins meant our measure of return on capital has increased from 8.9 per cent to 12.4 per cent.

“Our results show how our strategy is creating value for our shareholders. We are driving more volume into higher value products, and we are achieving results with increasing efficiency. We will continue to build on this strong platform to keep improving and delivering results to our farmers.

Investing in our communities and future

“At the same time, we have kept our promise to share great dairy nutrition with our communities through Fonterra Milk for Schools, and through our Grass Roots Fund and Living Water partnership, we are looking after local communities and the environment.

“We can only do all of this with the support and commitment of our farmers, investors and employees. Throughout the year we have challenged our people to adapt how we work to better manage the shifts in the global market. It has been a real team effort and I want to thank all of our people in New Zealand and around the world,” said Mr Spierings.

Future outlook

With a forecast Farmgate Milk Price of $5.25 per kilogram of milksolids (kgMS), the forecast total payout available to farmers in the 2016/17 season is $5.75 to $5.85 before retentions. This includes a forecast earnings per share range of 50 to 60 cents.

Mr Wilson said over the past three years the Co-operative had worked hard to align its structure to its strategy with a focus on achieving more value for the volumes of milk produced by its farmers.

“The higher forecast earnings per share range reflects the performance improvements the business will continue making.

“It is still early in the season, and we expect continuing volatility as reflected in price improvements in recent GDT auctions.

“Current global milk prices remain at unrealistically low levels, but as the signs in the market improve, we are very strongly positioned to build on a good result in the year to come,” said Mr Wilson.

The last season was a very tough one for dairying with the milk price well below the $5.05 almost all farms need to break even.

However, lower milk price makes it easier for the company to make money on its value-added products.

This shows the value of  the co-operative model. It enables producers to share the dividends which off-set the low milk price, and it is why Fonterra suppliers are determined to retain ownership of the company.

In businesses which aren’t co-operatives, higher dividends can come at the expense of producers.

You can see the annual results here.


Rural round-up

September 2, 2016

Fonterra on the eve of disruption – Fran O’Sullivan:

Fonterra chief executive Theo Spierings’ challenge ‘build windmills not walls’ is galvanising the dairy co-operative, writes Fran O’Sullivan.

Theo Spierings’ leadership has been tested as he re-engineers New Zealand’s biggest business during the tough times of a lengthy global commodity slump.

The story of how NZ dairy farmer incomes have plummeted, the company’s staff numbers have been slashed and hard calls made with its suppliers is well-traversed.

But behind the scenes there has been a fundamental refocusing of the company’s strategic operations which Spierings expects will result in a “strong picture” when he unveils Fonterra’s financial results late next month. . . 

Value-add products need a point of difference – Keith Woodford:

[This article was commissioned by the NZ Herald. It was written on 8 August 2016 and published on 31 August 2016. Since being written, some 24 days ago, we have seen substantial increases in dairy commodity prices, and in the short term (i.e. the forthcoming GDT dairy auction on 6 September GMT, and possibly subsequent auctions) these increases are likely to continue. However, the fundamentals remain unaltered; i.e commodities are highly volatile and will remain so, but there are also many traps for the unwary along the value-add path.]

There is increasing recognition within New Zealand that the dairy industry is in some trouble. Heading into a third year of low prices, questions have to be asked whether the industry is on a false path. And if so, where is the path back to firm ground?

Some will argue that the answers are simple: that we should reduce the dairy footprint on our land, and that we should focus on value-add. In reality, it is not that simple.

For those who live in the cities, it is easy to miss the importance of agribusiness to the overall economy. Much of New Zealand’s economic growth of the last 15 years is a direct consequence of a bountiful economic environment for agriculture in general and dairy in particular. . . 

GMO ruling frustrates biotech industry, farmers:

A lobby group representing New Zealand’s biotech industry fears further changes around the way genetically modified organisms are regulated could potentially force companies and scientists to shift overseas.

The High Court has upheld the Environment Court’s decision that local councils can have control over use and release of genetically modified organisms in their district.

The ruling was based on an appeal by Federated Farmers, which argued the release of GMOs was already regulated by the Environmental Protection Authority and local councils were not qualified to make such decisions.

But lobby group NZBIO chief executive Will Barker said the decision would come as a blow to the industry. . . 

Boat to change face of commercial fishing in NZ launched in Nelson:

A ceremony steeped in tradition was held in Nelson today to celebrate the launch of a boat that will change the face of commercial fishing in New Zealand.

The state-of-the-art vessel has been built for Tauranga-based fisherman Roger Rawlinson, of Ngati Awa descent. It has been named Santy Maria after his mother, who started the business with his father Bill more than 25 years ago.

The Santy Maria is the first vessel in Moana New Zealand’s $25-30 million fleet renewal project. It has been designed by Australian company OceanTech, with the technical expertise and vast fishing experience of Westfleet CEO Craig Boote, and constructed to the highest specifications by Aimex Service Group in Nelson. . . 

Seafood industry continues steady growth path:

The seafood industry continues to show strong growth with export earnings reaching $1.78 billion in the year to June, Seafood New Zealand’s Executive Chairman George Clement said today.

Speaking at the seafood industry’s annual conference, George Clement said the June result was an increase of $201 million on the same time last year, ”further demonstrating that we continue to make a significant contribution to the economy as one of the country’s main export earners,” he said.

“Last year industry accepted the Government’s aspirational goal of doubling export revenues by 2025 and we are on the growth path to achieve this,”
he said. . . 

The thirsty truth about avocados – Mitch McCann:

From Instagram to Pinterest, this is the golden age of avocados.

They’re so popular, the New Zealand industry’s earnings have doubled in the past three years.

Earlier this year avocado prices skyrocketed to around $4.50.

But now you can grab one for less than $2.

That’s because we’re into a bumper season, which may end up being New Zealand’s biggest ever.

But growing avocados takes a lot of water – much more than for things like potatoes, tomatoes and lettuce. . . 

Seeka announces the purchase of the Kiwi Crush™ and Kiwi Crushies™ product ranges from Vital Food Processors Ltd.:

Seeka Kiwifruit Industries (NZX-SEK), New Zealand’s and Australia’s largest kiwifruit grower, today announced the purchase of the Kiwi Crush and Kiwi Crushies product ranges from Auckland based Vital Food Processors Ltd (Vital Foods) for an undisclosed sum.

Kiwi Crush is a range of 100% natural kiwifruit based drinks that have since the early 1990s helped New Zealanders support and balance the digestive system. . . 

Hawkes Bay wine celebration reveals master class talent:

Two big names in the wine industry will be the hosts of the first-ever F.A.W.C! Masterclasses, at the Hawke’s Bay Wine Celebration.

A must-do event for wine lovers, when the cellar doors of 38 of the region’s finest wineries come together – the Hawke’s Bay Wine Celebration is being held in Auckland and Wellington next month. This is a unique opportunity to meet the winemakers while sampling award-winning wines. The event will showcase 50 Chardonnays, 38 Syrah, more than 30 Merlot Cabernet blends, as well as aromatic Riesling and Gewurztraminer through to newcomers Albarino, Tempranillo and luscious dessert wines. . . 


Fonterra payout steady

August 1, 2016

Fonterra has announced the forecast milk payout will remain at $4.25 and the  forecast earnings per share range for this season of 50 to 60 cents.

If the company achieves the higher figure it would make a total payout of $4.75 to $4.85. That’s still below break-even for many but given the continuing gloomy outlook for milk it’s not unexpected.

Chairman John Wilson said the solid forecast earnings per share range reflects performance improvements across the business and would be welcomed by farmers. However, with the Farmgate Milk Price forecast remaining at $4.25 per kgMS, it is another financially challenging season for farmers.

“The Co-operative is aware of how tough the situation on farm remains. We are focused on delivering as much cash as possible to our farmers by bringing payments forward while maintaining a strong balance sheet. This forecast is our best estimate at this early stage of the season. We will continue to update our farmers as we move through the season.”

Mr Wilson said the $4.25 Farmgate Milk Price reflects the continuing global uncertainty and the high NZD/USD exchange rate which continues to impact the competiveness of New Zealand dairy exports.

“The recent weakening of the Euro, combined with the continued strength of the New Zealand dollar, has meant a price advantage for European export dairy products.”

“We expect global milk supply and demand to come into balance over the course of this season. Farmers globally are producing less milk in response to lower prices and we are forecasting a three per cent reduction in our New Zealand milk collection for this season.”

Farmers here have seen the signals and have reacted to them. Farmers overseas, protected by subsidies, have been slower to cut production but they too are beginning to face the market, cut their costs and reduce production.

Chief Executive Theo Spierings said the returns from the ingredients, consumer and foodservice businesses continue to grow in-line with Fonterra’s business strategy to convert more milk into higher returning products.

“We are seeing the benefits of our investments in manufacturing over recent years. We now have more flexibility to make the right products at the least cost, delivering better returns for our farmers’ milk.

“Our good progress in continuing to increase value through our consumer and foodservice businesses, particularly in important markets such as China, Malaysia, Indonesia, Sri Lanka, Oceania and Latin America, is reflected in the lift in the earnings per share forecast.

“Constantly improving the performance of our business is an absolute priority and puts us in a strong position to create more value for our farmers. We are generating significant improvements and cash benefits through our ongoing business transformation that contribute to both our Farmgate Milk Price and our earnings,” said Mr Spierings.

Commodity sales are bread and butter, added value is the jam and cream which gives better returns and we need more of that.


Rural round-up

June 2, 2016

Friendly family rivalry at dog trials – Sally Rae:

Technically, Roger and Steph Tweed are rivals on the huntaway courses at the South Island and New Zealand sheep dog trial championships at Omarama.

But Mr Tweed (55) could not be prouder of his daughter as she competes with her dog, Grit, the offspring of his own champion trial dog, Gemma.

“It’s very special,” the Waitahuna farmer said, referring to the fact both he and his daughter had qualified to compete at the championships.

Miss Tweed (24), now a shepherd on a station at Taihape, started dog-trialling when she was still at school. . . 

Internet bargain takes on the best – Sally Rae:

Ben the heading dog was not a bad buy as far as internet purchases go.

The dog, which spent his early months as a pet, was bought by Nastassja Tairua for $300 after she spied him advertised for sale. He was 15 months old and had never seen a sheep. 

Miss Tairua trained the young dog and he proved to be a willing learner. He went on to win the Tux South Island maiden yarding event with her. . . 

Veteran still enjoys dogs’ life – Sally Rae:

Les Roughan has the distinction of being the oldest competitor at this year’s South Island and New Zealand sheepdog trial championships at Omarama.

Last year, the 92-year-old could have claimed another milestone, as one of the more senior Kiwis to undergo open-heart surgery. But he turned it down in favour of a heart valve.

“I wouldn’t have it. They said ‘why?’. I said … it would be six months away from my dogs. When I was fit to go back to them, they wouldn’t know me and I wouldn’t know them. . . 

Man admits abusing Waikato bobby calves:

A man who was captured on video abusing bobby calves in the Waikato has admitted animal cruelty charges.

Noel Piraku Erickson, 38, pleaded guilty to 10 charges of cruelty or ill treatment of an animal in the Huntly District Court on Thursday.

The seasonal worker was charged by the Ministry for Primary Industries after video emerged in November from animal welfare group SAFE which showed showed bobby calves being roughly handled. . . 

DairyNZ CalvingSmart events will set farmers up for a successful calving season:

DairyNZ is running CalvingSmart events in June and July to help farmers approach the calving season with confidence.

The CalvingSmart event is a full day programme for the whole farm team. Farmers can choose from a series of sessions for different experience levels, enabling them to develop practical skills that will help the calving season go well.

For senior management, there is a session on calf care and farmers’ responsibilities under the new draft animal welfare regulations. . . 

Govt approves updated AgResearch Future Footprint Plan:

Science and Innovation Minister Steven Joyce has announced that shareholding ministers have approved AgResearch’s updated Future Footprint Programme (FFP) business case which will reconfigure the Institute’s operations across four sites with an investment of $133 million in buildings and other infrastructure.

“AgResearch has presented a strong business case for change,” Mr Joyce says. “The FFP will modernise its facilities and co-locate research staff doing complementary work at the Palmerston North and Lincoln campuses.

“These campuses will form part of larger innovation hubs with other partners including tertiary institutions, Crown Research Institutes and industry researchers. The hubs will focus on food science in Palmerston North, and land-based sustainable productivity at Lincoln Hub.” . . .

Fonterra Management Appointments:

Fonterra Co-operative Group Limited today announced new appointments for two of its senior leaders.

Mike Cronin, who is currently Group Director Governance and Legal, is stepping into the newly created role of Managing Director Corporate Affairs, effective immediately.

Announcing the appointment today, Fonterra CEO Theo Spierings said Mike’s connection with the business, and its risk and reputation drivers, makes him the natural choice for this role. . . 


Theo Spierings to resign?

May 30, 2016

The Australian reports that Fonterra CEO  Theo Spierings is about to resign:

Speculation is mounting on both sides of the Tasman that the Dutch chief executive of Fonterra, Theo Spierings, is about to depart the dairy powerhouse, with Air New Zealand chief executive Christopher Luxon earmarked as his most likely replacement.

Mr Spierings has headed New Zealand’s largest company for about five years; and last year he faced criticism as Fonterra’s Australian arm fell into loss making territory, triggering a sale of its Australian yoghurt and dairy dessert business to Parmalat Australia in a quest to return it to profitability.

But the talk of his departure comes after Murray Goulburn chief executive Gary Helou recently left the Australian dairy co-op following a shock profit downgrade.

The dairy industries in both Australia and New Zealand are wresting with the challenges surrounding a lower milk price, and in New Zealand, the difficulties are compounded by the higher New Zealand dollar. Speculation has emerged in the past month on both
sides of the Tasman that Mr Luxon has been earmarked as the next Fonterra boss, with a departure by Mr Spierings, who has 30 years experience in the industry, said to be close.

Sources close to Fonterra have dismissed the suggestions. . . 

International commodity prices aren’t under the control of a CEO.

A company culture and its communications are and both need improvement at Fonterra.

UPDATE:

An email to shareholders from Fonterra chair John Wilson says:

  • I have received a number of emails from farmers this morning concerned at the media speculation that  Fonterra’s CEO Theo Spierings plans to resign.
  • This rumour is completely untrue.
  • Farmers and shareholders would be the first to know if the CEO of their Co-operative had resigned.

 

 


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