Fonterra needs to keep dumping assets, irrespective of performance, if they don't add to the cooperative's core business, Jarden said.

While the business had made a "solid start' on a new strategy to reverse recent poor performance and disastrous international investments under its new chief executive Miles Hurrell, "a path to higher sustainable earnings remains uncertain," Arie Dekker, head of Jarden's equity research team, said in a client note.

Dekker's advocacy of a slimmed-down Fonterra focused on its farmer-shareholders' needs has been matched by the cooperative since the departure in 2018 of its chief executive of the previous eight years, Theo Spierings.

"The co-op needs to be in a position that is "sustainable with what supplying farmers want from it."

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"Performance and competitiveness should trump breadth of activity," Dekker said, in part because the risk of Fonterra farmer-shareholders defecting to supply a competitor is "too high".

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A key question is the size of any milk pool that Fonterra continues to own outside New Zealand and "whether it is willing to have capital tied up in milk pools that don't add to its core New Zealand business, regardless of whether they are capable of making an economic return or not."

The dairy processor's first-quarter result was "a solid start and clean, with little in the way of surprises or major negatives," Dekker wrote. On Thursday, Fonterra narrowed its forecast payout to $7.00 to $7.60 per kilogram of milk solids from $6.55 and $7.55/kgMS. That lifted the midpoint of its forecast range by 25 cents to $7.30.

The company has signalled it expects to make progress in the next 12 months on quitting its Brazilian business, a strategic reassessment of its China Farms investment, and some other operating and possible brand decisions.

"But we think it is quite likely that consensus on capital structure and the asset base could extend beyond 12 months" because generating consensus among the farmer-owners takes time, Dekker said.

Any new phase of asset sales would not proceed before the consensus emerges, meaning that "the investment case for Fonterra Shareholders Fund still awaits clarity on what FSF looks like in the future.

"The first signs of a change in approach to non-core investments look encouraging but it is early and solving FSF's issues will be complex and take time," the Jarden note says, while the ability of non-farmer investors in the fund to agitate for more transparency or a change of direction "does not exist."

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Jarden continues to rate FSF 'neutral' for now, with a target unit price of $3.85. The units rose 2.5 per cent to $4.10 on Friday, trimming its decline so far this year to about 12 per cent.