Fonterra has affirmed its guidance for the 2016 milk payout to farmers, although chairman John Wilson said it was dependent on global dairy prices rising in the first half of next year from current unsustainable levels. Video source: Alan Gibson
Fonterra has affirmed its guidance for the 2016 milk payout to farmers, although chairman John Wilson said it was dependent on global dairy prices rising in the first half of next year from current unsustainable levels.
However a remit to cut the size of Fonterra's board from the current number of 13 to nine was heading towards defeat at today's annual meeting at Waitoa.
Results of electronic and postal voting for the remit, made available on video screens while the meeting was in progress, showed the proposal had garnered 54.39 per cent support - short of the 75 per cent required to change the co-operative's constitution. An official result is due later today. Neither the board, nor the Fonterra Shareholder's Council supported the remit.
The remit was put forward by former directors Colin Armer and Greg Gent, who argued that a smaller board would make it more efficient and quicker at responding to changes in market conditions.
In speaking to the remit, Gent said: "Our sole aim its to promote a fitter and leaner Fonterra," he said.
Chairman John Wilson told the meeting that Fonterra and the Fonterra Shareholders' Council are already working together to develop a discussion document on corporate governance, which is to be put to shareholders mid-way through next year.
The meeting was attended by about 400 farmer shareholders. Fonterra has about 10,500 member-shareholders.
The world's largest dairy exporter has forecast a farmgate milk price of $4.60 per kilogram of milk solids and a cash dividend of 35-to-40 cents per share for a total payout of $4.95/kgMS to $5/kgMS.
Fonterra has faced a challenging year globally with low dairy prices and a continued imbalance in supply and demand, which had a strong impact on the 2015 payout, Wilson told shareholders at their annual meeting at the company's Waitao UHT factory in the Waikato today. However, it was still disappointing that Fonterra's payout was only third-highest among New Zealand's dairy companies, he said.
Recently re-elected Fonterra chairman John Wilson. Photo / Jason Oxenham
Wilson had three priorities for the coming year - lifting the dairy payout, driving higher returns for Fonterra, and reviewing the governance structure, which had been put on hold in recent years while the company focused on maximising returns and cutting costs at a time of unprecedented global volatility.
The cooperative had "stood its ground" in the face of strong competition and had 85 percent of the country's milk production, while the number of shareholder suppliers continued to increase, Wilson said.
Milk volumes are expected to be down 5 percent this year, and could fall further, which would mean inventory levels below last season's, he said.
Fonterra CEO Theo Spierings. Photo / Jason Oxenham
Shareholders could expect to see a significant step-up this year in value-add products as the investment the company has made in recent years starts to pay off, he said. The company has spent $2.3 billion on capital expenditure in the past three years, but has eased back on capex this year because of farmer concerns over the cooperative's high indebtedness.
Its debt to equity ratio is expected to return to a range of 40 to 45 percent this financial year.
