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Fonterra says it is set to lose between $590 mln and $675 mln in the just-completed financial year after writing down the value of more of its assets; $800 mln debt reduction target not achieved; board discussion on capital structure

Rural News
Fonterra says it is set to lose between $590 mln and $675 mln in the just-completed financial year after writing down the value of more of its assets; $800 mln debt reduction target not achieved; board discussion on capital structure

The ailing giant dairy co-operative Fonterra is set to rack up a massive loss for the financial year just completed (end of July) and says it won't be paying a dividend. The company has also said it did not manage to achieve its targeted debt reduction of $800 million in the financial year.

The company has also instigated at board level initial discussions about its capital structure.

Fonterra said in a statement on Monday that it had been necessary to further write-down the value of some of its assets.

This would mean that the company would be reporting a full-year loss, for the year to the end of July, of between $590 million and $675 million.

There would be no dividend paid.

The Fonterra Shareholders Fund units, which are listed on the NZX, fell 19c to $3.57.

Global credit ratings agency S&P described the moves by Fonterra as "painful but necessary" in terms of turning the business around. 

"We believe Fonterra's portfolio and strategic reviews will result in a more disciplined approach to capital allocation and more versatile operational performance. In our opinion, this should result in a more stable earnings profile.

"That said, we are mindful of execution risks and any wavering of the cooperative's commitment to restoring its financial health would put the [co-op's credit] rating under immediate downward pressure."

Capital structure discussions - debt target not reached

Fonterra indicated it had "kicked off" discussions about its capital structure at board level, but said whatever was decided would not involve asking farmers to contribute more money "at this point".

Chief executive Miles Hurrell said Fonterra would remain a co-operative and farmer- owned but outside of that the board had been open to further discussion on what is right for the ongoing business in the long term. 

The company confirmed on Monday that it had not managed to make its targeted debt reduction of $800 million for the July financial year. Earlier the company had expressed confidence it would make that target.

Chief financial officer Marc Rivers said the company had made good progress, but "we're not all the way there". 

He said Fonterra was "absolutely" compliant with all its financial covenants and it had kept the ratings agencies fully informed as to its progress on debt reduction.

Cashflow is strong and "there's no issues at all in that regard", Rivers said.

The asset moves announced on Monday include chunky writedowns on investments in Brazil, China (the China farms investment), Australia and Venezuela.

Big write-down on Kiwi consumer business

Perhaps more surprisingly there is a $200 million write-down on the value of the NZ consumer business, with Fonterra saying that "the compounding effect of operational challenges, along with a slower than planned recovery in our market share has resulted in us reassessing its future earnings".

This write-down has come even though Fonterra had sold its Tip Top ice cream business for about $100 million more than the book value of that business.

This implies that the write-downs in the existing NZ businesses are in the region of $300 million.

Outside of New Zealand Fonterra has taken write-downs of hundreds of millions of dollars.

“Our accounting valuation for DPA Brazil will be impaired by approximately $200 million. This change is mainly due to the economic conditions in Brazil. While they are improving, consumer confidence and employment rates are not at the level required to support the sales volumes and price points our forecast cash flows were based on," Hurrell said.

“As a result of the previously announced sale of our Venezuelan consumer business, and the closing of our small Venezuelan Ingredients business, due to the country’s economic and political instability, we have made an accounting adjustment of approximately $135 million relating primarily to the release of the adverse accumulated foreign currency translation reserve. 

“Our carrying value for China Farms will be impaired by approximately $200 million due to the slower than expected operating performance. While the extent in which we participate is under strategic review, the fresh milk category in China continues to look promising and is growing.

"Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry. This includes closing our Dennington factory, which combined with writing off the goodwill in Australia Ingredients, results in a one-off impact of approximately $70 million (this includes the $50 million previously announced as part of the Dennington announcement)."

This is the full statement from Fonterra:

Fonterra Co-operative Group Limited today reconfirmed its underlying earnings guidance for the 2019 financial year that ended on 31 July 2019 (FY19), announced a final decision on its full-year dividend for FY19, and provided further information on some significant adverse one-off accounting adjustments.

Chief Executive Officer Miles Hurrell said that as a result of the full review of the business which has taken place across the year, as well as the work done so far to prepare its financial statements for FY19, it has become clear that Fonterra needs to reduce the carrying value of several of its assets and take account of other one-off accounting adjustments, which total approximately $820-860 million.

“Since September 2018 we’ve been re-evaluating all investments, major assets and partnerships to ensure they still meet the Co-operative’s needs. We are leaving no stone unturned in the work to turn our performance around. We have taken a hard look at our end-to-end business, including selling and reviewing the future of a number of assets that are no longer core to our strategy. The review process has also identified a small number of assets that we believe are overvalued, based on the outlook for their expected future returns.

“While the Co-op’s FY19 underlying earnings range is within the current guidance of 10-15 cents per share, when you take into consideration these likely write-downs, we expect to make a reported loss of $590-675 million this year, which is a 37 to 42 cent loss per share.

“We made a commitment to provide information to update farmers and unit holders as it comes available. The numbers still need to be finalised and audited but we now have enough certainty overall to come out in advance of our annual results announcement in September.”

Mr Hurrell said that the majority of the one-off accounting adjustments related to non-cash impairment charges on four specific assets and the divestments that the Co-op has made this year as part of the portfolio review.

“DPA Brazil, the New Zealand consumer business, China Farms and Australian Ingredients’ performance have been improving, but slower than expected and not at the level we had based our previous carrying values on.”

Commenting on the one-off financial accounting adjustments, Mr Hurrell said:

  • “Our accounting valuation for DPA Brazil will be impaired by approximately $200 million. This change is mainly due to the economic conditions in Brazil. While they are improving, consumer confidence and employment rates are not at the level required to support the sales volumes and price points our forecast cash flows were based on.
  • “As a result of the previously announced sale of our Venezuelan consumer business, and the closing of our small Venezuelan Ingredients business, due to the country’s economic and political instability, we have made an accounting adjustment of approximately $135 million relating primarily to the release of the adverse accumulated foreign currency translation reserve. 
  • “Our carrying value for China Farms will be impaired by approximately $200 million due to the slower than expected operating performance. While the extent in which we participate is under strategic review, the fresh milk category in China continues to look promising and is growing.
  • “In our New Zealand consumer business, the compounding effect of operational challenges, along with a slower than planned recovery in our market share has resulted in us reassessing its future earnings. We are now rebuilding this business and, as part of this, have sold Tip Top which allows the team to focus on its core business. The combined impact is a write-down of approximately $200 million.
  • “Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry. This includes closing our Dennington factory, which combined with writing off the goodwill in Australia Ingredients, results in a one-off impact of approximately $70 million (this includes the $50 million previously announced as part of the Dennington announcement).

“These are tough but necessary decisions we need to make to reflect today’s realities.

“We’re in no doubt that farmers and unit holders will be rightly frustrated by these write-downs. I want to reassure them that they do not, in any way, impact our ability to continue to operate. Our cash flow remains strong, our debt has reduced and the underlying performance of the business for FY19 is in-line with our latest earnings guidance of 10-15 cents per share. We remain on track with our other targets relating to reducing capital expenditure and operating expenses.”

Chairman John Monaghan said that in-light of the significant write-downs that reflect important accounting adjustments Fonterra needed to make, the Board had brought forward its decision on the full year dividend for FY19.

“We have made the call not to pay a dividend for FY19. Our owners’ livelihoods were front of mind when making this decision and we are well aware of the challenging environment farmers are operating in at the moment.

“Ultimately, we are charged with acting in the best long-term interests of the Co-op. The underlying performance of the business is in-line with the latest earnings guidance, but we cannot ignore the reported loss of $590 - $675 million once you look at the overall picture.

“Not paying a dividend for the FY19 financial year is part of our stated intention to reduce the Co-op’s debt, which is in everybody’s long-term interests.

“Our Co-op remains strong at its core. Over the last 12 months we have improved our cash flow, reduced our debt and removed significant cost from within the business, but there is still more to do. The business units that are at the heart of our new strategy are delivering for us and we look forward to discussing our new strategy and our performance with our owners in September.

“It’s important that we now implement our new strategy and deliver value back to them,” says Mr Monaghan.

This is the statement from global credit ratings agency S&P:

Bulletin: Fonterra Co-operative Group Ltd.'s Risk Profile Can Withstand Asset Impairments

MELBOURNE (S&P Global Ratings) Aug. 12, 2019--S&P Global Ratings today said that it views Fonterra Co-operative Group Ltd.'s (A-/Stable/A-2) approximately NZ$860 million asset impairments and decision to suspend dividends as a painful but necessary part of the cooperative's turnaround. The impairment charges are noteworthy but noncash and, in our view, do not affect Fonterra's fundamental risk profile.

That said, we forecast the group's underlying earnings for the year ended July 31, 2019, to be materially below the prior year. Credit metrics could also deteriorate, but to a lesser extent given cash proceeds from asset divestments, reduced capital expenditure, suspension of dividends, and an improved working capital position.

The dividend suspension indicates the group is willing to actively protect the interest of creditors. We anticipate additional asset divestments, further reductions in capital expenditure, and some normalization of earnings to restore Fonterra's credit metrics comfortably within our expectations for the 'A-' rating. While the cooperative's leverage will remain above its downward ratings trigger at the July balance date, the deleveraging timetable is still broadly consistent with past expectations.

We believe Fonterra's portfolio and strategic reviews will result in a more disciplined approach to capital allocation and more versatile operational performance. In our opinion, this should result in a more stable earnings profile. That said, we are mindful of execution risks and any wavering of the cooperative's commitment to restoring its financial health would put the rating under immediate downward pressure.

This report does not constitute a rating action.

See here for the full dairy industry payout history.

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100 Comments

Got too greedy

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just like a lot of the speculators.. what goes up will eventually come down ...

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Got too incompetent, more like it.

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I agree. The board was investing a lot of money in things they didn't understand. That money has been poured down the drain. At least with paying no dividends the capital should go back into the functional parts of Fonterra. However a lot of this reminds me of the 1980s in New Zealand where companies went crazy with acquisitions that made little or no sense (except for asset stripping). This time Fonterra got stripped of cash.

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the things they invested in went beyond incompetence,
they get burned in china,
so go back again for a second round and get burned again.
keith has been pointing it out for a long time
https://keithwoodford.wordpress.com/2018/08/20/why-is-fonterra-so-bad-a…

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Yep, and ultimately all it means is more subsidies for farmers given that Fonterra is firmly in the too big to fail category.

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You know, I begin to wonder if the expression should be "too big to survive" which perversely then makes them too big to fail.

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Yes but it also comes back to greed. The hunger for greater and greater profits and share value.

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What a surprise!
This was on the cards the day the OCR was trimmed by 0.5%. In fact, it was apparent some days before that when what this site termed a 'huge' drop in swap rates occurred.
And what did this mornings commentary give us? Another 'huge' drop in swap rates.
Guess what's coming! and OCR of 0.5% ( next time?) and a recalibration of New Zealand asset prices - all of them - because this, is only the beginning of the end.

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Yes, there is what powers that be know, and then there is what they tell US.
Trade war means bad for commodity producing nations, like NZ I am afraid.
Today we have also an article saying as Yuan falls, so will NZD
Which means, excuse me, more inflation as import prices rise. But they are cutting interest rates??

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"But they are cutting interest rates?
"We" have driven so far down the wrong road ( cutting interest rates) that our economic Navman tells us we don't have enough fuel to get back to the last filling station without running empty. So the only alternative is to drive on in the 'wrong' direction, hoping that a filling station comes out of the blue to save us.
So, yes. More interest rates cuts to come. There is no viable alternative that doesn't involve massive hardship - that, ironically, is coming anyway and far harder than it needed to be.

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bw - What do you mean by a recallibration of asset values?

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In foreign currency terms, our assets will be cheaper to foreign buyers (a lower NZ$ ahead - much lower. The OIO will need to be vigilant.), but added to that is likely to be a set of nominally lower asset prices onshore. The biggest asset class we have; the one consuming most of our valuable debt resources ( that has been tragically misapplied) is - property. Make of that what you will.

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Looking forward to the banking fiasco that follows any recalibration. Stash cash.

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Wilco recalibration means sudden or sustained drop in house prices. They are recalibrated inline with incomes in New Zealand.

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I understand recalibration - I wanted to confirm which way bw saw the recalibration going.
I have a contrary view. Lowering interest rates will have a positive impact on income producing asset values.
With leverage as my mortgage costs lower my profitability goes up.
Increasing profitability in addition to falling returns on other asset classes such as bank deposits and bonds will lead to either stable or rising land values.

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China, Brazil and Australia investment write-downs.
Too big a Company and out grown its specialist knowledge base.
Farmers won't get dividends. Another hit to consumer power

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They seem to think they will simply be able to replicate what happens in NZ everywhere else. No matter how many times they fail, they keep thinking the same thing...

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Do you see any job losses ? not the cream at the top.

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Our big old dinosaurs in trouble. I understand Fletchers might be in a bit more strife too.

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... it always seemed to be a sunset industry . . burning a mountain of coal to turn milk into powder , so you can sell it to a lactose intolerant population who have no fresh water to reconstitute it ...

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The old chums and cronies club. Foundations laid in Muldoon’s time. Trotter, Davis, Cushing etc etc, The Business Round Table. Of course in those days they did care about the share price and shareholder returns somewhat. Nowadays no more substance than chaff in the wind.

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Dairy is done. There is a whole generation coming who will happily choose soy/coconut/almond/etcetera versions of milk. Vegan cheese, fake meat. Who will refuse to fly or drive. It is not hard to see this trend becoming stronger. Look at the success of Beyond Meat in the States.

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It's inevitable

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I agree that dairy has been way overdone in NZ, but the likes of Beyond Meat are also way overvalued. That particular stock will crash. Good future for that industry but way overvalued too early, like the dot com stocks were.

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Things like beyond meat will continue to improve, of that you can be sure

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Plant based meats sound a lot more promising than lab grown.

https://medium.com/@josiah.zayner/cultured-meat-will-not-be-realistic-a…

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I have no idea what it will be, all I know is,it will be

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PA, your post doesn't sound that convincing but as you say in your previous 2 posts: "it's inevitable" and "of this you can be sure"

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This food tech is definitely on a grow path, a mega-trend for the 21st century if you will, but that doesn’t mean Mr Market hasn’t overpriced Beyond Meat for now. Earnings aren’t that much yet, and food can’t expand as rapidly as digital tech products (like software) can and does.

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I'm not especially enamored of this sort of thing myself but people will continue to develop it. Nothing surer

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I'm part of that generation and have noticed most switch to soy milk for a few years then go back to milk. Why? The health benefits don't exist, to the contrary soy and other alternatives don't provide good animal fats. Not to mention the taste.

Fonterra is in trouble because of poor management, not consumer trends.

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And let's not talk about vegan cheese.....

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You can add Coconut yoghurt to that list. Ewww.

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.... or veggie bacon , extruded out of soya and toasted tofu .. also known as vacon ... and facon ...

As in " eww , facon off , it's got no facon flavour ! "

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Re Fletchers, there will be some very bad news coming out in next month my friend at HO says. People running round like headless chickens in one dept.

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Yeah I have heard similar things. F+F= big trouble for NZ.
And don't think that the reserve bank didn't know this too

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Rather poignant that their both names start with "F" just add "up" and you have it in a nutshell

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Doubly F%$*éd.

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You are sailing close to the wind my friend.

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And tack thru the headwinds.

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Is it just me or is this a continuation of what seems a habit of the Reserve bank coming out with commentary on the economy in general being closely followed by pronouncements from Fonterra about its business performance that reinforces the RBNZ's views?

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Hmmmm, it's almost as if they have inside knowledge. Nah, can't be.

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Colin Riden was on this site 8 years ago way back then Fonterra could have up to 12 billion of debt.
Fonterra is broke, we don't know how that plays out but it not going to be good.

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I remember a diary farmer friend going to the large herd conference, the bankers got up and told them that the farm income is just to pay the interest, their real business is owning assets, assets re going through the roof.
Another meeting he was told, just buy the farm the banks will always come to the party, use the gst for the deposit.

This is going to be so painful for so many families invested in the industry and the RB sat back and just watched this bubble. Now they want us all to share the pain.

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It really doesn't look pretty.
And most of this mess has almost nothing to do with the economic incompetence of the current govt. It's got a lot to do with the corporate incompetence of these private sector dinosaurs along with the policies of the previous govt.

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It's got absolutely nothing to do with the current or even previous governments. This is a track farmers chose when they elected the boards over the last 20 years. They have mined the retentions built up by previous generations that created the separate companies and the Dairy Board that then became Fonterra .
Going to be interesting where to from here.

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who do you think lent Fonterra all that money? If they want out then it's over for another co-op, co-ops are best for farmers and the country but we let the wolves in.
Some of those big corporates must be worrying. Also our costs have blown out, a low dollar won't help much now costs are as high as %80 of gross sales, all we will get is more inflation, more risk, more uncertainty.
This year rates up %18, electricity charges up, road user taxes %10, Insurance %15 and on and bloody on.

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And when you look at the lending practices and glance across to the housing sector and others it's all propped up by incessantly increasing lending to mine that equity. As a co-op there was a chance to do it differently and keep control. The board instead went over to the dark/corporate side.

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I see 5400 cows heading out of Napier soon for China, still exporting out genetics.

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Yes - I commented a few years ago about the wisdom of that.
"It's actually a win-win. It's helping grow the industry and create more demand for New Zealand milk," farmer and Fonterra director Ian Farrelly said.
Was that the same Farrelly that produced the movies "Dumb and Dumber" and also "Dumb and Dumber Too"
https://www.tvnz.co.nz/one-news/business/live-cattle-shipment-boosts-fo…

Talk about selling the family silver. What with Theo Never Here and directors like that what chance did this company really have?

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This worked so well with kiwifruit exports so they could be grown overseas too. Repeating the same mistakes.

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Yes who remembers the National nutters slogans of "Double Primary by 2025" but who will the cockies be blaming in 2020 for their woes ?

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Where was the bank regulation regulater.

Where is the bank regulation now.

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Might be a pointer as to why RB dropped by 50bp last week. Lack of dividend will I imagine impact on farmers spending, which then flows through general economy.

Interesting thing will be if RBNZ cuts by 25, 50 or holds come September - if trade tensions continue racking up, CNY weakens - could be interesting.

What's the chance the Kiwi will be sub 60 come Xmas - that's only a drop of 6/7% from today's spot rate?

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What you say here about the exchange rate is very possible. Perhaps not by Xmas, but soon after. I've thought this for a while now.

Interestingly, I heard Tony Alexander of BNZ speak in early May this year. He said then, that BNZ were predicting 69 -70 cents by years end....Lol.

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Gees, TA is being proven wrong and wrong. Saw only good times ahead for the Auckland property market too.

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Property and farming have always been his two areas of expertise.

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OCR cut not helping them, or what ?
Claw back the high salaries and bonuses of top bosses for the last several years....

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Not long now before all of our means of agricultural production is in foreign ownership or control. Going down the same track as Westland Milk.
Hands up all of us who knew this was the path we were on way back in at least 2010, on the sale of the Crafar Farms.

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And Westland farmers cleverly pegged their income to Fonterra suppliers.....

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Yes, though when Fonterra had a $3.90 milk payout Yili, I understand supported their Oceania suppliers at the time, and paid out more - $4.50. To be fair though, most if not all, the corporate processors payouts are set around what Fonterra pays.

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the china farms have been a drag since day one, the sooner they get out of them the better, how much of the loss was hidden in other accounts.
also time to trim the expense in NZ, why the multi million dollar office in auckland, another stupid decision move it back to Te Rapa on land they already own, build a office building and save some $$$ in the long term
its time the shareholders held the company executives to account because the board are not

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sharetrader - I wish we could

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Someone want to show me how too please?

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write to the board members
https://www.fonterra.com/nz/en/about/governance/board-of-directors.html
or contact your local rep and voice your unhappiness over the performance
https://www.fonterra.com/nz/en/about/governance/shareholders-council.ht…
problem is they don't listen
lucky I have only shares in one farm with fonterable we moved the other over to open country a few years ago, guess which we get the better returns on

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by Cowpat | 20th Mar 19, 9:50am
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by Cowpat | Thu, 09/08/2018 - 16:23
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How is South America performing

by Cowpat | 10th Oct 18, 9:02am
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" Trim milk "

by Cowpat | 1st Dec 17, 1:31pm
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by Cowpat | Thu, 10/03/2016 - 18:12
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Fonterra , I suspect has other concerns . I would suspect that last months arbitration in Singapore will throw another wrench in the balance sheet in the coming months. Buying Danone shares shorting Fonterra may be a good play.

Casual , the post was one of two I posted in March 2016 regarding Danone .I have an interest both in Danone and in cows .Following post , purchased Danone shares May 2016, at 59 euros, currently 70.9 euros. Dividend 1.79 Exchange rate Eur/Nzd then 1.55 now 1.74.

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The lack of a dividend will have a slight to moderate affect on most dairy farmer's cashflow. The bigger impact will be any further weakening in Fonterra's share price. The banks have traditionally valued the shares for security at a level up around $5 allowing for temporary fluctuations - with the attitude they debt serviced themselves. Any confirmation that a $3 in front is the new norm will reduce asset values by around $300k and borrowing capacity by around $200k - that is where it is really going to hurt when you add the impact of the bank's new found enthusiasm for principal repayments as well.

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I can remember a time when banks wouldn't take shares as security. Then they insisted on it. I have often wondered what would have happened to land prices if they didn't lend on them and take them as security.

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There were some warning signs for Fonterra's results today:
1. A foreign CEO whose interests are definitely not aligned with Fonterra's and NZ's

2. The CEO only has experience in commodity markets not in consumer markets but were forever asked to transform Fonterra to a producer for consumer products, so called value added products

3. An external and foreign consultancy company were invited to access Fonterra's biz model and structure

4. the Co-op structure will forever drag Fonterra's transformation if there were any

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too many fat cats and not enough cows!

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If you hire a board of corporates, you hire a CEO for millions per year, they're obliged to do something to prove their value. Something flashy that a farmer wouldn't think of themselves.
Unlike the farmers, the CEO can scoot after a couple of years, set up for life regardless of the consequences.

I blame farmers for being stupid enough to fall for the corporatisation of their industry, frankly. They talk big about not trusting the shiny-suits but still fall for the BS when greed kicks in.

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Lets not forget that farmers have had it good in the past. I always remember the picture in one of the newspapers with the farmer driving his Porsche. Funny that many businesses start asking for government handouts as soon as things get tough.

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Yes, you're right.. back in mid 2000s, an old friend from my work at Palmerston North bought a brand 2 new Range Rovers one for him and one for his wife.. all from Fonterra's payout on their dairy farm near Bulls..

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Now it's REA's and builders driving the porches but for how long?

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Not long

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"Now it's REA's and builders driving the porches"
Some already downgraded to Kia and Hyundai

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I'm a supplying shareholder and agree fully with your comment. Since formation the board, shareholders council and naive suppliers have undermined and abandoned cooperative principles, crucial for long term health and survival. They succumbed to ridiculous self serving rhetoric from the corporate sector, along the lines of cooperatives having 'lazy capital', 'lacking business agility', and supplying shareholders deficient in necessary business and governance expertise, hence 'managed direction' on who to vote for in board elections. Look where it has got us.

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They can keep refusing to pay a dividend, all this will do is ensure that they can never raise outside capital again. Great strategy, do they think investment advisers are going to allow their clients money to be put in an organisation that treats investors with contempt.
Yes they can borrow elsewhere, but as they can't playoff a public capital raising they will lose more control as any lender/investor will want to protect themselves from current practices of paying income to farmers and ignoring the providers of capital.

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Yet A2 and Synlait never pay a dividend and investors accept that? Sure their shares have capital gain but Fonterra's reached $8+ at one stage. They would be treating shareholders with contempt if they paid a dividend when it meant they were reducing a bona fide milk price in order to do so.

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Dairy, construction, real estate, tourism - all the biggies facing headwinds

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Look on the positive side of this announcement - after years of feeling like being treated as mushrooms, Fonterra shareholders are finally hearing the truth about the companies financial situation. We deal with it now and look forward to a new dawn in Board and shareholder relations. Hopefully.

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Change the Board/Top management ?
Change the share structure ?
Get a partner to invest funds for renewal ?
Who will be the White Knight ?

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Feels like that Dawn might have choppers coming at us and 'Ride of the Valkyries' playing over the PA......

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The arrogance of JW and TS knew no bounds.

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Plenty of suppliers could see through the rhetoric and spin CO. Have you seen any signs of real change in governance and management which generates confidence in the future? Hopefully is the operative word.

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On the lighter side, and we need it, when I was in Bali and talking to the driver I told him we have herds of cows of several hundreds in NZ, he looked at me incredulous, then he asked "how do you feed so many cows?" lol. (there's no grazing paddocks in Bali, it's all taken up to grow rice)

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They have cut their dividend in order to 'try' and preserve their current credit rating of A- from S&P.

They get downgraded and they are in a world of pain.... not only does the cost of debt increase but they will be under threat of losing key customers like Nestle who have a minimum credit rating requirement of their suppliers.

Fonterra management are bailing as fast as they can,,,, dividends first, staff numbers will be next.... they are beginning to pay the price for years of mgmt. indecision and inaction on some shocking investment decisions.

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FSF currently down $0.160 or 4.6%.
Just kick them out of the NZ50 already.

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You're probably correct. Debt to Equity is likely >1 after this latest result and the balance sheet is starting to deteriorate. You have to ask yourself, how does a co-operative get this levered? At least yields are a lot lower, though their spreads will be blowing out.

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So, RBNZ cuts rates to spur spending and our biggest company/exporter misses dividend and is in deep trouble. Do you think recession can be avoided, with less money in the hands of farmers/people affected by the rate cut ?

Recession, here we come.

This will also affect the health of banks which have lent large to farmers/Fonterra.
RBNZ must have known this was coming. The move to increase capital/reserve requirement seems prescient.

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Are the write downs enough?

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Farmers have caused so much ecological damage to NZ. Just look at the run off poisoning our rivers and ponds. Not to mention the plight of the poor bobby calf's and the forever pregnant cows drained til they are no longer any use and then mercilessly culled. The milking industry is purely concerned with greed at any cost. Its time has come. The government must not bail this cartel out. You don't see the rich farmers helping anyone out when the payout is on a high and they are all driving round in their flash 4x4's. Time for NZ to let this old timer industry go. Like slavery, it will hurt us to the core in the future when we see what was actually allowed in our NZ. Lets stop flogging this poor dead horse and resign this industry to the past!

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Yep Foreign Buyer some things need fixing alright. But so do many hips and knees. Cancer patients need expensive drugs. Teachers demanded pay rises.
Tourism relies on air travel. And that is a volcano about to blow.
What do you suggest to do to pay the bills?
On a lighter note. MPI have found another 155 farms testing positive to the new mbovis milk tests from autumn. Yep under control it is. Yep yep yep.

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Foresters have caused so much ecological damage to NZ. Just look at the sediment and logs clogging our rivers and ponds.
Urbanites have caused so much ecological damage to NZ. Just look at the sewage poisoning our rivers and beaches.
Tourists have caused so much ecological damage to NZ. Just look at the human waste poisoning our roadsides, beaches and lakesides.
Flyers have caused so much ecological damage to NZ. Just look at the emissions poisoning our air.
Drivers have caused so much ecological damage to NZ. Just look at the road toll killing our people, the emissions poisoning our air.

Commenters have caused so much ecological damage to NZ. Just look at the electrons they've tortured to pollute us with their vacuous opinions......

(oh, wait, electrons are too small to see)....

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Seven wrongs don't make a right. There is no doubt one of the wrongs is worse than the others. Farming needs to change its ways or be left to die. The people will not put up with profit driven ecological destruction and hidden animal cruelty for much longer.

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"The people will not put up with profit driven ecological destruction and hidden animal cruelty for much longer , unless of course it's going to require them to look at their own situation the they will turn the proverbial blind eye."
There, fixed your last sentence for you.

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I will get the lad to set em with a twitter account. Happy to help.

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Fonterra shares spilling red ink while the rest of the stockmarket hits all time highs! Fonterra will be toast if recession comes calling!

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