By PHILIPPA STEVENSON and NZPA
Fonterra is considering turning its consumer products subsidiary, NZ Milk, into a standalone investment vehicle.
Chief executive Craig Norgate told the International Dairy Federation conference in Paris this week that the year-old farmer co-operative was grappling with the question of capital structure.
"We are conscious that not
all our shareholders have the same appetite for investment," he said.
The company was questioning whether it should provide an alternative channel for shareholders who would prefer to increase their investment in NZ Milk, Norgate said.
His comments signal that Fonterra may be resurrecting the plans for a corporate structure for the international consumer business recommended by consultants McKinsey & Co in 1999 during the industry's debate on post-deregulation structures.
Two years ago, a standalone NZ Milk positioned to attract outside investment was unanimously approved by the industry's strategy steering committee and favoured by several industry leaders, including new Fonterra chairman Henry van der Heyden.
It could again be under discussion as part of Fonterra's developing Project Galileo business strategy, which is expected to be announced before the end of the year. NZ Milk - Fonterra's equivalent of the high-tech product-making Tatua dairy co-op - is picked to be the giant company's growth engine.
In 1999, it was forecast to earn $20 billion additional revenue over 10 years. McKinsey said that to achieve the growth it would need $12 billion of additional capital - $8 billion from its own borrowing capacity but $4 billion would have to come from shareholders other than dairy farmers.
Tradeable external equity would have allowed farmers to choose whether to invest in NZ Milk while enhancing transparency in its performance, the consultants said.
NZ Milk, with a portfolio of 96 brands, last year had revenue of $5.5 billion.
