Director fired in milk rort

By PHILIPPA STEVENSON

The first casualty of the dairy industry "Powdergate" scandal is Ross Cottee, a director and senior executive of Kiwi Dairies' Australian subsidiary Cottee Dairy Products.

That revelation yesterday took the gloss off news that the new dairy mega-cooperative Fonterra is now rated the world's fourth-biggest dairy company.

Instead, the focus has been on Fonterra's continuing investigation into a multimillion-dollar illegal exporting operation, with expectations that more heads are likely to roll.

Kiwi chairman Greg Gent told shareholders this week that a staff member had been fired over the affair, but gave no name.

It is now known that the employee was Mr Cottee.

A Cottee worker yesterday confirmed to the Business Herald that Mr Cottee was no longer with the company and referred inquiries to his wife, Sandy Cottee, the company's general manager.

Mrs Cottee refused to comment.

The couple are understood to be 25 per cent shareholders in the New South Wales company at the centre of the illegal exporting scam after it bought about 5000 tonnes of milk protein from Tauranga company South Pacific Distributors (SPD).

SPD had bought the product, valued at about $39 million, from Kiwi and exported it without a licence to Australia.

Mr Gent has questioned whether Kiwi, which owns 75 per cent of Cottee, knew the product was to be illegally exported, but links have been drawn between the dairy manufacturer and its subsidiary because SPD is owned by another Cottee director, Terence David Walter.

Kiwi would have made a profit of $4 million (not $400,000 as reported earlier) over returns it would have received if the product had gone through correct Dairy Board channels, said Mr Gent.

Meanwhile, industry sources have said Cottee shipments seized in April by the US Food and Drug Agency for misbranding could have been an attempt to avoid American import duty.

The product, labelled WPC80 stockfeed, may have been whey protein concentrate of below 80 per cent purity, which attracts high duty. Product above 80 per cent purity attracts no duty. It is unlikely to have been stockfeed. Whey protein is valued at thousands of dollars a tonne.

The sources said the product could also have been skim milk powder, another high-value product which attracts heavy duty.

Powdergate may be besmirching Fonterra at home but the $12 billion company is rating well internationally. Rating agency Standard & Poor's has assigned it an AA rating - equivalent to those applied to the ANZ, ASB Bank, Citibank, Commonwealth Bank of Australia and HSBC - which describes the company as a good credit risk.

Fonterra chief executive Craig Norgate said the rating was a benchmark to exceed. "My long-term goal is to achieve a credit rating comparable with the New Zealand Government," he said.

And Rabobank has lifted the New Zealand mega co-op's ranking among international dairy companies from ninth to a heady fourth.

The ratings are based on last year's turnover.

Rabobank global dairy industry specialist Adrie Zwanenberg rated the then GlobalCo ninth in April, up from a previous 14th ranking.

The company said it was not making anything of Rabobank's new ranking.

Spokesman Matthew Hooton said the fourth placing showed Fonterra had scale but the numbers tended to fluctuate. "What's important is delivering continued profitability to our shareholders."

Dr Zwanenberg said Fonterra's surprise elevation reflected the September alliance with Australia's Bonlac Foods to form Bonland Dairies, acquisition of two Mexican dairy companies, and growth in milk production.