Fonterra farmers keen to get an early start on share trading under the big co-operative's capital restructure plan will have to wait while leaders focus on getting more fundamental housekeeping changes through a shareholder vote next month.

Speaking to shareholders on a Sky broadcast, Fonterra chairman Sir Henry van der Heyden and shareholder watchdog chairman Blue Read said farmers who attended 77 meetings throughout the country had been enthuisiastic about a proposed three-step capital restructure.

It was notable there were calls for all three steps in the five-year programme to be introduced at once, which would mean introducing the third step - share trading between farmer-shareholders - earlier than planned. Company leaders do not want to start discussions on this leg of the restructure until next year.

Read said to put it on the table early was "simply not practical". An active market had to be set up and with great care, and the co-operative was not ready, he said.

Van der Heyden urged farmers to get steps one and two "past the winning post to protect the co-operative".

Farmers' support had been sufficient for the board to consider putting these to the vote at next month's annual meeting, he said.

New Zealand's biggest company is proposing a capital restructure to protect its increasingly vulnerable balance sheet from share redemption risk and to pursue growth ambitions.

Chief financial officer Jonathan Mason said in the Friday broadcast Fonterra had $500 million to spend a year. Of this, $400 million was earmarked for essential operating costs, leaving only $100 million to pursue a one-time window of opportunity to boost marketing of the co-operative's technical expertise and product innovation.

Its farmer-owners roundly rejected an earlier director proposal which involved a partial market listing.

The second restructure attempt proposes offering Fonterra's 11,000 farmers 20 per cent more shares each, changing the present fair-value share valuation system to reflect that the market for them is restricted, and - in the third step - introducing share trading between farmers.

Fonterra shares are currently milk production-linked and valued as if they are market tradeable. They are redeemable, which means if a farmer does not fulfil expected milk production, the co-operative must pay them out for unused shares. This policy led to a recent $600 million run on its balance sheet after a drought.

Several other issues had arisen in the record turnout meetings, van der Heyden said. Farmers wanted to be able to buy more than 20 per cent extra shares. The board would consider this when it could be certain there were buyers and sellers for the shares, and would prefer it was part of stage-three discussion, he said.

Other issues were capacity adjustment (charge for extra spring production) possible share-value dilution; what the extra capital would be used for; raising enough capital and payout retention, he said.

Mason said capacity adjustment under the restructure proposal would be revisited. He assured farmers new capital would not be diluted. Read said some farmers had wanted to get rid of capacity adjustment completely but that was not practical.

Mason said the new money would be spent on capital projects.

Fonterra could not take on any more debt if it failed to raise enough new capital, van der Heyden said. It could consider holding more money back from payout to farmers or sell parts of the business to bolster the balance sheet. But this would go against the business strategy.

THE FUTURE

The company is proposing a capital restructure to protect its increasingly vulnerable balance sheet from share redemption risk and to pursue growth ambitions.

It has $500 million to spend a year, $400 million was earmarked for essential operating costs, leaving only $100 million of discretionary capital.

By Andrea Fox