Fonterra chief stays mum on re-applying for job

By PHILIPPA STEVENSON

Fonterra chief executive Craig Norgate is saying nothing about his uncertain future with the company.

Speaking for the first time since his 19-month-old job went on the block in December, Norgate refused to say whether he would re-apply for the position, which is the subject of an international search.

"We've agreed nobody will say anything," he said. "We really don't want to unsettle people."

But the move by Fonterra's board to put the job up for grabs at the end of Norgate's two-year contract in June has already unsettled some of the company's shareholders.

One recently described the worldwide search, agreed in the merger agreement between the companies that formed Fonterra, as one of the dumbest compromises of the process.

Replacing its chief executive mid-year was the last thing Fonterra needed to do and the board should have recognised the stupidity of creating further upheaval in the company, the shareholder said.

Chairman Henry van der Heyden said at the time of the pre-Christmas announcement that the board had complete confidence in Norgate, who had been asked to re-apply for the job.

From America, where he had just presented Fonterra as a case study to a Harvard Business School agribusiness seminar, Norgate said he had been filled with enthusiasm for the business by the feedback to his presentation.

He and his family were staying in California until he had made a second presentation on January 21 to the International Dairy Food Association, an America-based dairy processors body, as part of a panel on the internationalisation of the food and dairy industries.

During his time in the US he was working on Fonterra's priorities for the year which he would make public at the end of the month.

Last month, chief financial officer Graeme Stuart said the company was backing off growth through acquisition.

Fonterra's long-espoused goal of $30 billion in revenue by 2010 was no longer an objective, he said.

"A lot of businesses double in size every five years. The reality is we did double in size through the first five years. Whether we double in size in the next five years or not is incidental to where our focus is."

Stuart's comment that the company would go for organic revenue growth was consistent with the business strategy announced in October.

Norgate said the focus would be on bottom-line growth - 13 to 15 per cent annual profit improvement - and consolidating the current business rather than going through another growth spurt.

"We still see them [acquisitions]. We are a large business and businesses of our size are constantly buying and selling things.

"But it won't be the same level of activity as you've seen in the last 12 to 18 months."

Dairy Partners Americas, the joint venture with Nestle, would continue to produce self-funded acquisitions in South and North America.

This month, Fonterra said it had sold its consumer and milkpowder businesses in Venezuela and Central America to Nestle, receiving US$131.5 million ($243 million) net of its contribution to the establishment of the chilled, liquid and manufacturing joint ventures.

Norgate said a continued high level of speculation on likely moves in Australia was acting as a brake on the company.

"While they are pricing that [anticipation] in we struggle to see something that creates value for us."

He did not expect any change in this season's payout to farmers, set at $3.70 a kilogram of milksolids compared to last year's $5.30.

Because of the high level of the NZ dollar, the company's concern was for its impact next season.

"At current levels it has offset all the increase in market prices we have worked hard to achieve, which is not great for the economy."

Norgate said in a market update on Friday that milkpowder prices had little room for further improvement. Butter and anhydrous milk fat prices were expected to gradually weaken, although more slowly and from a higher starting point than in recent years.

In the past 60 days, whole milk powder prices have increased nearly 20 per cent and skim milk prices by about 30 per cent.