Fonterra is New Zealand's biggest business, collecting nearly 80 per cent of the country's raw milk. Photo / Michael Craig
Fonterra is New Zealand's biggest business, collecting nearly 80 per cent of the country's raw milk. Photo / Michael Craig
Fonterra’s shareholder watchdog has again called out the dairy heavyweight over what it says is a disappointing failure to deliver information.
In its quarterly update to Fonterra’s 8000 farmer-owners, the Fonterra Co-operative Council said it “expects Fonterra to deliver on commitments that are made to members or, where commitments areunable to be met, that a transparent explanation is provided”.
One of the matters it was referring to was the failure of New Zealand’s biggest business to deliver an update on its long-term strategy ”in early 2024″ as management had advised shareholders in September last year.
The council said it had been “looking forward to an update” and noted the response from Fonterra after questioning was “there is no update to provide at this stage”.
When the Herald approached Fonterra for comment, the written response was: “We have work under way looking at the next phase of our strategic implementation. This work is ongoing and we will share an update when ready.”
The council was also “disappointed” with Fonterra’s 2024 interim results reporting on two new efficiency metrics announced last September.
“Members had been advised these metrics would be reported against every six months.
“Whilst Opex per kilogram milk solids was reported in materials released to the NZX, it was not reported to co-op members at interim results meetings nor in the 2024 interim report.
“The second metric, gross profit per kgMS, was not reported against at all.”
In response to Herald inquiries, Fonterra said: “In relation to Fonterra’s two new efficiency metrics, we reported on the Opex per kgMS numbers in our disclosure to all shareholders via the NZX. We determined that it was more appropriate to update the gross profit from Core Operations per kgMS metric annually at the end of the financial year due to both the seasonality of our business and because the metric formula deducts the impact of the Farmgate Milk Price, so it is more useful to present this after the season’s milk price has been finalised.
“We also plan to show the annual impact of two key drivers of this metric, which are product prices and manufacturing performance,” Fonterra said.
Fonterra also has dividend-carrying, non-voting units listed on the NZX and ASX.
The council, elected by Fonterra’s farmer-shareholders to represent their ownership of, and interests in, the co-operative, last year called on the company to provide greater detail on financial information.
It said the company could provide more detail on how members’ capital was allocated by region, product channel and key business units.
John Stevenson is the chairman of the Fonterra Co-operative Council.
In its FY23 annual report, the council said Fonterra had announced a slew of investments, joint ventures and partnerships in the past 12-18 months, but the council and farmers “have limited knowledge of these investments”.
It also said Fonterra’s sharing of post-investment reviews after divestment had not been adequate, citing the sale in 2022 of the Chilean consumer and manufacturing business Soprole.
The sale fetched $1.05 billion and Fonterra last year returned $800m, or 50c a share, of the capital to shareholders.
The Fonterra board’s response to the council’s concern over the lack of information about investments and partnerships was carried in the council’s annual report.
The board said it was committed to providing members with as much transparency as possible, “while balancing this against commercial sensitivities”.
It cited several information sources it had provided to shareholders.
The board said it would consider every year if an investment, or grouping of investments, were appropriate to disclose separately.
On the council’s call for post-investment reviews, the board said as part of recent annual financial statements, the performance of Soprole and the Australian business had been included in a business performance report.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
