Hart may make quick profit on Fonterra deal

Fonterra shareholders wait for some exciting news at yesterday's Whangarei meeting. Picture / Paul Estcourt

Fonterra chief executive Andrew Ferrier is confident the co-operative got a good deal out of its asset swap with Graeme Hart - even if the high-flying billionaire manages to make a quick profit out of the transaction.

Ferrier told dairy farmers at Fonterra's annual meeting in Whangarei yesterday Hart was an excellent financial engineer and it was "not impossible" that he would extract a profit from the co-op's former assets now to be floated as part of a new Goodman Fielder.

Ferrier was responding to a question from the floor which picked up on comments in the Business Herald. There is speculation that Hart may be about to turn a profit of as much as $344 million from his purchase of Fonterra's domestic consumer business in August.

Ferrier said Fonterra had brought in an independent valuer to assess the assets before the sale.

Hart and Fonterra also had different long-term goals and strategies.

"Graeme is good at taking costs out of businesses and selling them," Ferrier said. "Fonterra is good at growing consumer brands businesses."

Fonterra chairman Henry van der Heyden said he and the board were comfortable with the price that had been achieved. Fonterra had been quietly trying to sell off the Kiwi Meats business for some time, as it was not a core asset. As part of the package that was sold to Hart, it got a much better price that it would have if it had been sold on its own.

A full house of about 200 dairy farmers turned out for the meeting that was notable for the lack of "big-ticket issues" on the agenda.

Farmers voted to approve a pay rise of nearly 10 per cent for Van der Heyden and 8 per cent for his directors. The Fonterra chairman's annual fee will rise from $205,000 to $225,000. Fonterra directors will be paid $108,000 - up from $100,000.

Fonterra said the increase was made to address the growing gap between fees here and those for directors in similar-sized companies in Australia.

The increase would not bridge that gap and it continued to recognise that Fonterra's elected directors did the job partly out of a sense of service to the co-operative.

Ferrier and Van der Heyden warned farmers Fonterra was facing a tough year. An improved payout forecast - up 15c to $4 a kg of milk solids - reflected extra costs that had been removed from the business.

But it was predicted that there was little upside left for international dairy prices and farmers should take a cautionary approach to budgeting.