Fonterra praised for international CEO search

By PHILIPPA STEVENSON agricultural editor

Fonterra's decision to put its chief executive's job up for grabs before its second birthday is winning some support.

Outspoken Waikato shareholder Garry Reymer said the company must go for the best person for the position, held since June 2001 by Craig Norgate under a two-year contract.

Norgate, whose rivals for the job were two Dairy Board executives, has refused to say whether he will apply again.

But Reymer told the Business Herald the Fonterra board was doing the right thing in mounting an international candidate search.

"If Norgate makes it this time then he will have earned it," he said.

Reymer said that when established Fonterra was supposed to be a new company with a new culture incorporating the best of its three legacy companies, New Zealand Dairy Group, the Dairy Board, and the company Norgate formerly headed, Kiwi Dairies.

"This was always going to be compromised if the CEO came from any one of the legacy companies."

It would have been better if "independent eyes" had looked over issues the company had faced over the last two years, including the Powdergate illegal exporting saga, the write-off of the Kiwi Dairies subsidiary central to the saga, Food Solutions, and the decision to run with the Aspire computer programme for milk tanker scheduling and daily farm milk return slips, Reymer said.

"Even now I think it would be of huge value to have a CEO who all shareholders can see as independent from the past. Fonterra is too important to New Zealand to stick with a compromise."

The view was endorsed by an industry watcher who said it was appropriate the search occurred.

He picked Norgate, who he described as a street fighter, would again put his hand up for the position.

"He's not the sort of guy who backs off."

The company's challenge would be to attract enough candidates of high calibre, he said.

Meanwhile, credit rating agency Fitch has maintained from April its long-term AA- and short-term F1+ ratings of Fonterra. Fitch said Fonterra's credit rating was underpinned by two key considerations: the highly efficient nature of the New Zealand dairy industry, and the financial flexibility inherent in Fonterra's method of paying shareholder suppliers, whereby about 30 per cent of the estimated final payout is withheld until the start of the new season.

Fitch also welcomed Fonterra's strategy of backing its downstream consumer goods businesses into joint ventures with strategic partners who can contribute their own products, distribution networks and capital.

The most important of these international alliances was the formation of Dairy Partners Americas, a 50-50 joint venture with Nestle.

Last October, Standard & Poor's reaffirmed its long-term rating of AA- and short-term rating of A-1+.