Northland dairy farmers reeling at Fonterra's forecast $675 million loss say it's a bitter pill to swallow — but back its new boss for confronting the co-op's woes head-on.
The dairy co-op's massive expected loss is due mainly to write-downs in the value of failed overseas ventures.
The company, New Zealand's biggest, says it won't pay a dividend to its 10,000 farmer-shareholders this financial year and will instead use the cash to pay off burgeoning debt.
Fonterra's troubles have sparked comparisons with the fate of Westland Milk Products, which was sold to a Chinese dairy firm earlier this year.
Prime Minister Jacinda Ardern said yesterday the government would not bail Fonterra out.
Ōkaihau dairy farmer Terence Brocx said, as an owner who had fronted up with the capital for Fonterra, the losses were ''a bitter pill to swallow''.
While the writedowns in Venezuela and Brazil were due to factors outside the company's control, most of the losses were due to poor management.
''The money invested in China Farms, and the losses incurred, are unacceptable, and it's unforgivable that Fonterra has a history of unsatisfactory performance in Australia and New Zealand.''
However, he was pleased the new board was tackling the problems directly and frankly, rather than disguising them as in the past.
Brocx also pointed out ''the big picture'' that Fonterra farmers were among the best paid in the world for their milk, ''which is not bad for a little country that exports 95 per cent of production''.
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Greg Gent, a Ruawai dairy farmer who was a Fonterra director until nine years ago, said some of the writedowns were ''not unexpected'' and he was surprised it had taken so long.
''There's been a lot of cash invested in businesses that haven't delivered. Business is about taking risks and thing go wrong in business, but the quantum and the geographical spread of the writedowns [in China, South America, Australia and New Zealand] suggest it's not just bad luck. It's a debacle.''
Gent said the company needed to get its debt under control quickly and done the right thing by choosing not to pay a dividend.
''If you don't take decisive action when you have a problem, you end up with bigger problems.''
The only small positive was new chief executive Miles Hurrell's decision to confront the problems head-on.
Regional Economic Development Minister Shane Jones believed the total cost to Fonterra, including write-downs yet to come and lost opportunities, would be around $2 billion.
The company could survive only if farmers accepted a lower payout, leaving more money to pay down debt.
That was difficult because many farmers were facing higher costs due to society's demands for higher environmental standards.
Jones has long been critical of what he described as a culture of corporate excess at Fonterra, whose leaders had rewarded themselves while driving the company into the ground.
In the 2018 financial year former chief executive Theo Spierings netted $8m and 24 staff earned at least $1m. In the same year the company made a $196m net loss.
Jones called for an urgent reshaping of company culture and significant changes of personnel.
''This lays bare the arrogance that ordinary New Zealanders have to endure from the big end of town. A lot of corporate New Zealand flushes wealth down the dunny and swaggers around like their dung has no odour.''
Jones said he had fielded a large number of calls from people fearing Fonterra could go the same way as Westland Milk Products, but he did not believe the situation was that parlous.
Federated Farmers dairy industry group chair Chris Lewis told RNZ the freeze on dividends this year could be tough for farmers, particularly with skyrocketing on-farm costs.
However, farmers liked the new chief executive's honesty and believed his changes would make a stronger co-op in future.
He said farmer shareholders needed to stick it out with Fonterra, elect good directors and help make it a better company.