Fonterra shake-up rattles head office

Fonterra is understood to be gearing up for a fresh round of redundancies - this time at executive level.

Sources say up to 30 per cent of management staff could be culled from some business units as part of a wider cost-cutting exercise.

The shake-up is being led by chief financial officer Guy Cowan.

Last week, the dairy company said 300 factory jobs would go as part of the consolidation of its cheese-making plants.

Fonterra yesterday confirmed a new cost-cutting review was under way at head office.

Cowan said it was far too early to predict the level of change that would result from the process. But he could not rule out the job cuts.

"This involves all business units looking at everything they do, how they do it, why it is part of the business and how we can become more efficient," he said.

According to its last annual report, Fonterra has more than 1000 staff on salaries of more than $100,000 a year. However, that figure includes engineers and scientists as well as those in executive positions.

About 600 staff work at the company's head office on Princes St in central Auckland.

Cost-cutting has been an ongoing process for Fonterra since it was formed from the merger of Kiwi Co-operative and NZ Dairy Group in 2001.

But efforts to accelerate the savings have intensified as earnings have been squeezed by the high value of the dollar.

In May 2004, the company warned staff of long-term plans to cut 700 jobs, mainly from areas like administration, as part of its project Jedi.

It is understood that Jedi is now largely complete and the latest project is part of a new drive to achieve more efficiency.

Fonterra's payout to its farmer shareholders dropped from $4.59 per kg of milk solids last year to a forecast $4 this year.

While the dollar may have peaked, its fall comes too late to help the exporter this season.

In the medium term, global dairy prices may also be about to fall from the record highs of the past two years, adding further pressure to Fonterra's balance sheet.

In the longer term, the company maintains that the fundamentals of the dairy market remain in good shape.