Sunday, July 3, 2022

Winter signals end of era

Fonterra chair Sir Henry van der Heyden will stand down as director next winter, probably after the May board meeting.

This date was announced by chair-elect John Wilson, who said that was always the intention when the board unanimously asked van der Heyden to stay on after the end of his chairmanship this December.

Under the constitution, because he will retire less than six months before a scheduled annual election for board positions, a one-off election for van der Heyden’s seat won’t be held.

Wilson told Northland dairy farmers in late November that van der Heyden wanted to go some time before the November 2013 annual meeting and the end of his three-year term as director.

Wilson denied the retirement date was a negotiated outcome as a result of pressure on van der Heyden to stand down immediately (Dairy Exporter, November, page 9).

“It was always Henry’s intention to go next winter, so when we checked the dates, like the November 2013 annual meeting, next May’s board meeting will be his last,” he said.

“Farmers would not want us to have the expense of a one-off election for his replacement, so the six month-rule will apply.”

However that does mean a second extended period of eight farmer-directors around the board table instead of nine, as has been the case this year since Colin Armer resigned (Dairy Exporter, September, page 11).

After the “family disagreements” of the past four or five years, during which Fonterra has been inward looking, it must refocus globally and on performance, chair-elect John Wilson said.

“There are no excuses – we have now permanent capital and a trusted milk price determination.”

“As (chief executive) Theo Spierings is wont to say, there are a lot of cooperatives around the world who would love to be where we are today.”

Asked what Fonterra intended to do with its lower capital risk profile after trading among farmers (TAF) begins, Wilson said directors and management would have more confidence about executing the refreshed strategy. The release of $600 million from the balance sheet would also create room for mergers and acquisitions. It would refresh the drive for a stronger return on capital, because if capital was not earning appropriately perhaps it should be returned to farmers.

Questioned about how Tatua managed to beat the Fonterra payout by $1.50/kg milksolids (MS) last season, Wilson pointed to its specialised product mix.

“They are 0.7% the size of Fonterra, and if we produced their volume of specialised products it wouldn’t shift our payout by one cent.”

Fonterra could make those products but it would collapse the market prices for those small volumes.
In general competing cooperatives will pay what they need to for milk, so their payouts will be comparable to Fonterra, so it will be in their balance sheets that the full picture will be seen, Wilson said.

While cashflows were tight on-farm the season had started well – “nationally we are 6% up at this time (late November)”. Milk flow peaked on October 18 at 84.8 million litres nationwide, 3.6m litres higher than the peak in 2011.

Asked about the Milk for Schools programme he said he saw it as entirely commercial, to arrest declining milk consumption. Early survey work showed far greater appreciation of and support for Fonterra.

He was confident dairy farming in NZ could be both more productive and more sustainable.
“However, we are playing catch-up footy at present and we need to get in front of nutrient decisions.”

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