Fonterra brings jobs home, puts NZ brands business under microscope

Change continues at belt-tightening Fonterra .

Getting embattled Fonterra "back to basics" has seen some Singapore jobs returned to New Zealand and Fonterra Brands NZ in line for change.

Further to confirming that the major review under way within New Zealand's biggest company has resulted in redundancies, the Herald has learned some global consumer and food service jobs have been moved back home.

Asked to confirm whether the big dairy co-operative had disestablished its overseas-based marketing and innovation global consumer brands business and moved the function to New Zealand with a small team, the company in a written response said some roles had been transferred from Singapore to New Zealand.

The company would not say how many jobs were affected.

It also confirmed the Herald's understanding that the Fonterra Brands NZ (FBNZ) business was under review.

"We're talking to employees in FBNZ about potential changes but no decisions have been made. Naturally, supporting our people and making sure they hear from us directly is our priority through this process," the company said.

As part of the recent appointment of Judith Swales, formerly chief operating officer of "velocity and innovation", as chief operating officer of global consumer and food service, her former division's critical business capabilities had been integrated into the wider Fonterra business, the company said.

The "velocity" activity was the brainchild of former chief executive Theo Spierings, who exited last year.

In December the company announced its corporate affairs and farmer service business Farm Source had been amalgamated.

Fonterra won't say how many jobs have been lost as its new chief executive Miles Hurrell implements a "back to basics" programme as part of a major internal business review and debt reduction drive promised by its new chairman John Monaghan.

The website of the milk processor and global dairy exporter says it employs 22,000 people worldwide.

The company, which last year posted a historic first annual net loss of $196 million and debt of $6.2 billion, said if there had been significant or material changes as part of the review it would have announced them to the market.

Fonterra, owned by 10,000-or so dairy farmers, has non-voting, dividend-carrying units in farmer shares listed on the sharemarket.

Hurrell recently said the company was making good progress on its review and asset divestments to fulfil a pledge to reduce debt by $800m this financial year.

All eyes will be on the company on Wednesday when it announces its interim financial results. It is also expected to announce some firm asset sale plans.

Market watchers aren't optimistic the half year news will be good given the recent announcement no interim dividend will be paid and a decision on any full-year dividend could only be made at the end of the financial year.

However Monaghan at the same time announced a lift in the milk price forecast for farmers this season, again highlighting the tension Fonterra's current structure creates between the share price and the milk price.

As a farmer-owned co-operative it is committed to paying its farmer-owners the maximum possible through the milk price. But it is also expected to function as a corporate commercial enterprise and pay dividends. It has had no formal earnings retention policy to shore up the balance sheet when big-ticket outlays and overseas investment losses happen as they have in recent years.

Fonterra was created from a big industry merger in 2001 under special enabling legislation to be a national export champion.

An immediate imperative for Monaghan and Hurrell is to retain Fonterra's credit ratings to avoid higher interest costs on its borrowings, which at the end of the July 2018 financial year were $6.2b.

Fitch Ratings earlier this month put Fonterra on a "negative" outlook while retaining, for now, its "A" long-term credit rating.