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Home / Business / Companies / Agribusiness

Fonterra chief leaves at top of his game

Owen Hembry
By Owen Hembry
Online Business Editor·NZ Herald·
20 Sep, 2011 05:30 PM6 mins to read

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Andrew Ferrier has been following Canada's progress in the World Cup. Photo / Steven McNicholl

Andrew Ferrier has been following Canada's progress in the World Cup. Photo / Steven McNicholl

Is Fonterra's Canadian born chief executive Andrew Ferrier watching the Rugby World Cup?

"Is the Pope Catholic? I'm loving every minute of it," he says.

But then Ferrier, who leaves his job at the dairy giant this week, is no stranger to the oval ball having played for 17 years after getting hooked on the game in 1976 while at the University of New Brunswick.

"It was my first time away from home and [I] got into partying and I never showed up for [gridiron] football camp and halfway into the season I really regretted it and a friend of mine said, 'Well why don't you come and try rugby'.

"As soon as I got out there I just thought 'Where'd this sport come from?' I'd never heard of it."

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For Ferrier, who was at Eden Park for the opening game and is following the fortunes of the Canadian team, moving to rugby-mad New Zealand was a bonus when he took the top job at Fonterra in 2003.

The dairy farmer co-operative reports its latest annual result tomorrow and then, on Friday, Ferrier's eight-year tenure as chief executive of the country's biggest company comes to an end.

"It'll tear my guts apart on Friday to say goodbye but I won't be very far away."

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Ferrier, who is married with two children at university in Canada and another studying in New Zealand, says family comes first.

"It's been a battle for eight years to balance my responsibilities to Fonterra and my desire to be a father and a husband ... it's just so overwhelming in terms of time."

Ferrier, 52, plans to spend time in Canada but live more than half the year here.

He is one of New Zealand's highest paid executives, with remuneration of $5.1 million in the year ended July 31, 2010, and the next stage of his business life will probably involve investing in mid-sized companies and mentoring chief executives.

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"I'd pick and choose the ones that I like the business model, where people could massively use somebody with my experience but I don't have to be full-time," he says. "I don't want to be a consultant though, I'd rather be a principal and an investor."

Ferrier, who once sat on the board of a United States company that was building an integrated solar electricity business, will be looking for investments that help further society.

"I'm not saying that's what I'm going into [green energy] but I do want to be involved in things I think will be very good for society and not just exploiting society."

He could also appear in some company boardrooms.

"I've had some people call but I've made no commitments at this point in time."

Ferrier says he will follow Fonterra with enormous pride and ideally as a shareholder, with hopes of investing in an equity partnership with a piece of a dairy farm.

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His replacement is Dutchman Theo Spierings - the former acting chief executive of Dutch dairy co-operative Royal Friesland Foods - who starts work on Monday. Ferrier met Spierings about six years ago.

"When we announced that I was going to stand down in March he rang me up and just said, 'Do you think the board would take my candidacy seriously' and I said, 'You have a perfect resume'," Ferrier says.

"He knows consumer brands very well, he knows ingredients well, he's worked in many places in the world and he's been in a co-op for 23 years, so he knows every aspect."

Ferrier feels enormously satisfied after his time in charge of Fonterra.

"I've always felt that the best way to define the role of CEO is to build an organisation so that you can step down and you're confident the organisation will keep getting better and I feel exactly in that space."

In the year ended July 31, 2010, the company posted revenue of $16.7 billion. The forecast payout to farmers before retentions for the 2010/11 season is a record $8-$8.10.

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However, it has not all been smooth sailing. In 2008 Chinese dairy company Sanlu, of which Fonterra owned 43 per cent, was one of 22 firms caught up in a melamine contamination scandal in which at least six infants died.

Fonterra came under intense media scrutiny, Sanlu went bankrupt and the company wrote off its $201 million investment.

"We dealt with the situation in Sanlu knowing we had to do what's right as we call it every step of the way and our people followed the highest level of integrity every step of the way," Ferrier says.

The global dairy market had undergone a seminal change with people getting wealthier and looking for healthier foods such as dairy, Ferrier says.

"There's an enormously positive outlook for dairy in the next 10 to 20 years and Fonterra is probably better placed than anybody in the world to capitalise on that.

"We are the global leader in dairy production, we have relationships with every top food company, every top pharmaceutical company, great brands in different markets, we couldn't be closer to the sweet spot of where the whole world is going and that's something that is fantastic for New Zealand."

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FERRIER AT FONTERRA

High points
* Record forecast payout before retentions for 2010/11 season of $8-$8.10, compared with an average of $5.11 for the previous eight seasons.

* Farmer support in 2010 for a capital structure change aimed at removing redemption risk and providing permanent share capital, with farmers keeping full ownership and control.

* Launch in 2008 of GlobalDairyTrade online auction system, which is forecast to sell 680,370 tonnes of products during the next 12 months.

Low points

* Part-owned Chinese dairy company Sanlu in 2008 was caught up in a contamination scandal in which infants died. It went bankrupt and Fonterra wrote off a $201 million investment.

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* An earlier attempt at capital structure change started in 2007 was dropped when it became clear farmers would not support a model that included the creation of a listed asset-holding company.

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