Wednesday, December 6, 2023

Farmers back Fonterra, mostly

Neal Wallace
The prevailing mood might have been optimism among Fonterra shareholders at the annual meeting but a residual bitterness lingered, evidenced by two calls for chairman John Monaghan’s resignation.
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About 200 shareholders attended the meeting in Invercargill on Thursday at which shareholders Jan-Maarten Kingma and Peter Moynihan both called for Monaghan’s head, saying there needs to be accountability for the decisions leading to Fonterra’s poor financial performance.

After the meeting Monaghan said he was not surprised by the resignation calls or the contrasting mood of the meeting, which reflected the broad church that is the co-operative.

“My whole job, and there is always politics in a co-operative, is to focus on the future and that is what we need to do.”

Monaghan says the meeting’s support for the new New Zealand-first strategy mirrors the mood of the 2000 shareholders directors have met in recent weeks.

Kingma told shareholders Monaghan has to take responsibility for overseeing the erosion of $5 billion in equity and the decision that led to the $605m net loss after tax. 

Moynihan said change is needed because co-operative shareholders are disheartened and Fonterra is losing milk share. 

“I encourage directors when they next vote for a chairman to vote for change because change is needed.”

Monaghan said experience is needed to run a $20 billion business and the board has changed.

Other than himself and Leonie Guiney the balance of the board has been elected or appointed in the last three years.

There was support for the board and the strategy.

Cambridge farmer Jason Trow said it is appropriate shareholders hold the board and management to account for the co-operative’s performance but the key is that lessons are learned.

“If we don’t learn from the past then that is most foolish. The best to lead are those who live through those decisions and that is you,” he told Monaghan.

Thomas Clinton said the board recognises and is addressing the co-operative’s problems and it needs shareholder support.

“I’m not sure we have seen all the bad news but I see our board trying to turn our co-operative around.”

New independent director Scott St John said the board appreciates the past year was bruising for the owners and the staff but the mood is positive, confident and energising.

“I would not be here if it were not.”

Shareholders voiced frustration at the constraints of the Dairy Industry Restructuring Act (DIRA), the likelihood of hitting the year-end goals of earnings per share of 15c to 25c and a 5% return on capital and Government legislation.

Chief executive Miles Hurrell and Monaghan said Government officials and politicians are listening to Fonterra on DIRA, the Zero Carbon Bill and Essential Freshwater reforms. 

Hurrell says with milk volumes forecast to be flat the next wave of value will come from meeting the requirements of customers.

The marketing dynamics have changed from growing milk volume where value was generated from collection, processing and product optimisation.

“If they want NZ milk then they have to pay for it. That is a different discussion to what we have had before.”

Asked where the extra value will come from Hurrell said focus will be in the key categories.

Food service and NZ ingredients have grown 3% year on year with greater contributions expected from paediatrics, sport and active lifestyle and medical and aging products.

“It’s about having a focus on those categories and not being distracted by other business units.”

Southland farmer Dylan Ditchfield asked how the board will rebuild trust with shareholders. Monaghan promised greater transparency from the board, a shift in the language used when talking to shareholders and to listen more than talk.

Gareth van der Heyden acknowledged the difficult board decision to impose a salary freeze on staff but says it reflects the co-operative’s problems.

He is positive about the future of the co-operative.

“I am a proud, passionate and energised Fonterra shareholder.”

Retiring independent director Simon Israel praised Hurrell, saying he has moved quickly to address the challenges and taken stakeholders with him.

Israel says farmers should not be nervous about the challenge of synthetic proteins but the answer is to invest more in research.

“If I had one wish it would be to see Fonterra increase its investment in research, to bring out new benefits of milk.”


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