"At this point, we would characterise FSF's key achievement as having been in halting a strategy that resulted in meaningful value destruction," Dekker said.
"FSF moved away from its core capabilities and pursued a strategy that was not consistent with its capital structure.
"But FSF's transition is still in its very formative stages and importantly we believe FSF needs to start to put more flesh around what its new strategy means for farmer shareholders in the next five years," he said.
"It would be a bold departure from the past but we would like FSF to give more visibility on direction, highlighting its confidence and allowing for more scrutiny and accountability.
"We continue to wait for a better understanding of what FSF's embedded New Zealand capacity is capable of producing and how that aligns with what it wants the product mix to be in five years' time."
The co-op's net economic debt was down to $4.7b with the potential to come down further by $400m to $500m without a meaningful loss of earnings from successful exits from China Farms and Brazil's DPA.
Dekker said there was a link between Fonterra's disappointing performance of the past decade and a lack of openness.
He said the market needed more visibility on:
• The investment required and expectations FSF has for its core value add growth products and markets over the next five years, given the still mixed performance in Consumer & Food Services in Greater China and Asia.
• What FSF's plans are for non-core largely stand-alone offshore businesses that fit outside of, or on the edges, of FSF's NZ focused strategy, such as Chile, Australia Ingredients.
• The framework in which FSF assesses and thinks about its retention of mature markets – in the context of its growth investment priorities and capital structure considerations - how large should the co-op be?
• What FSF's substantial research and development investment - $100m annually - is going into and what the investment requirements and expectations are from early-stage products.
• Capital structure and milk supply.
Dekker said that while FSF is moving in the right direction on earnings, having achieved FY20 normalised earnings per share of 24cps, its performance remains substantially below where it sat 10 years ago when it was consistently around 40-50cps.
Fonterra's guidance of 20-35cps in 2021 highlights that the path to a targeted return to 50cps in 2024 is possible but annual results remain subject to volatility, hence the wide range.
"Consistent sustained earnings growth is key from here," Dekker said.
Shares in Fonterra's NZX-traded units last traded at $4.06, having gained 28 per cent over the past 12 months.
Meanwhile ratings agency S&P Global said Fonterra's successful execution of its strategic initiatives and deleveraging plan have provided balance-sheet strength, available liquidity, and headroom in its credit metrics to accommodate its modest final dividend payment.
The agency said higher earnings, cost control, disciplined capital allocation, and significant debt reduction have culminated in a materially strengthened credit profile, with debt to EBITDA improving to 3.4 times.
"Fonterra's revised strategy to refocus on its core function of collecting, processing, and selling New Zealand milk and the divestment of noncore assets have underpinned earnings stability," the agency said.
Fonterra's NZX-traded units last traded at $4.07, up one cent, having gained 28 per cent over the past 12 months.
