Fonterra job cuts rise to 750

Theo Spierings says Fonterra management has had to make some tough decisions. Photo / Jason Oxenham

The number of jobs to go from Fonterra as a result of a review of its business has risen to 750 from a previously announced figure of 523, resulting in savings of $103 million a year, the company said.

One-off savings resulting from the review, such as improving working capital, have enabled the co-operative to support its farmers during challenging market conditions, Fonterra - New Zealand's biggest dairy co-operative - said.

Chief executive Theo Spierings said the purpose of the review was to ensure that Fonterra remained well positioned to compete in the global dairy market.

"We have great people, but we have to make tough decisions to ensure Fonterra remains competitive in this environment," he said in a statement.

Fonterra said in July that it was axing 523 jobs, for an estimated cost savings of $55 to $60 million, as part of a major overhaul of its business.

After today's announcement, the estimated cost savings will rise to $103 million.

Dairy prices have fallen sharply since last year, but they have been improving in recent weeks. At the latest GlobalDairyTrade auction, the GDT price index rose by 16.5 per cent since the last sale.

Wholemilk powder prices, the key component of Fonterra's farmgate milk price, have risen sharply to an average price of US$2495 a tonne, but they are still well below the US$3,000 a tonne needed before Fonterra's $3.85 per kg of milksolids milk price forecast can be realised.

Fonterra has made a 50 cents a kg support package available to farmers in the form of a soft loan.

The loan will be interest-free until 31 May 2017, after which Fonterra may charge interest.

In July, Fonterra said its business review included measures to improve profitability at Fonterra's Australian business as well as a series of additional measures to remove barriers across the organisation to enable it to unlock more value.

NZX-listed Fonterra units, which give non-farmer investors access to Fonterra's dividend flow, last traded at $5.12, up 2 cents from Fridays' close.