Fonterra's super keen farmers told to wait

Fonterra farmers keen to get an early start on share trading under the big co-operative's capital restructure plan will have to wait while leaders focus on getting more fundamental housekeeping changes through a shareholder vote next month. It was notable there were calls for all three steps in the five-year programme to be introduced at once, which would mean introducing the third step - share trading between farmer-shareholders - earlier than planned reports the NZ Herald. Company leaders do not want to start discussions on this leg of the restructure until next year. An active market had to be set up and with great care, and the co-operative was not ready. Chief financial officer Jonathan Mason said in the Friday broadcast Fonterra had $500 million to spend a year. Of this, $400 million was earmarked for essential operating costs, leaving only $100 million to pursue a one-time window of opportunity to boost marketing of the co-operative's technical expertise and product innovation. Fonterra shares are currently milk production-linked and valued as if they are market tradeable. They are redeemable, which means if a farmer does not fulfil expected milk production, the co-operative must pay them out for unused shares. This policy led to a recent $600 million run on its balance sheet after a drought. Several other issues had arisen in the record turnout meetings, van der Heyden said. Farmers wanted to be able to buy more than 20 per cent extra shares. The board would consider this when it could be certain there were buyers and sellers for the shares, and would prefer it was part of stage-three discussion, he said. Mason said the new money would be spent on capital projects. Fonterra could not take on any more debt if it failed to raise enough new capital, van der Heyden said. It could consider holding more money back from payout to farmers or sell parts of the business to bolster the balance sheet. But this would go against the business strategy.