Fonterra has big plans to improve the performance of consumer business New Zealand Milk, says chief executive Andrew Ferrier.
He told shareholders at the annual meeting in Palmerston North: "I appreciate that you expect more from your investment."
New Zealand Milk - which produces and markets products suchas yoghurt - was singled out as the worst performing part of the business in a report by the shareholders council last month.
It has been hurt by the high cost of raw ingredients - ironically the very thing that has the rest of Fonterra's business booming.
Ferrier said that under newly appointed brand expert Sanjay Khosla, New Zealand Milk was developing strategies to put more resources behind its power brands, such as Anchor. Resources would also be put behind a number of "big hit" projects.
Ferrier also confirmed that, as reported by the Business Herald last month, a major restructuring of the company's transport and logistics operations was under way.
Chairman Henry van der Heyden told the meeting the outlook for Fonterra's core business looked good. Firm commodity prices had carried over into this season and were at historical highs at the end of the September quarter.
"Market demand looks positive and that's showing through in contract commitments from buyers looking for secure and stable supply," van der Heyden said.
The "bugbear" was the exchange rate of the kiwi dollar versus the US dollar. "We'll be converting this year's earnings at between 60USc and 62USc compared with an average of 52USc last season," he said.
Not all of that currency appreciation could be offset by the higher pricing.
He said he was presenting a cautious view, given world instability could quickly influence demand patterns.
Fonterra raised its forecast payout for the coming season by 5 per cent this week to $4.05 per kg of milk solids.
The co-operative, owned by about 12,000 dairy farmers, revised its forecast before the end of the dairy season, and it has some certainty because of its policy of hedging currency 15 months in advance.
The forecast compared with a payout of $4.25 per kg in the previous season.
