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Fonterra still needs to face the big questions

Rural News
Fonterra still needs to face the big questions

Fonterra's capital restructure proposal will buy it another three or four years of farmer-only funding then it will need outside equity, says a rural leader who represents the voice of 40 per cent of the NZ  dairy industry, sharemilkers. Federated Farmers' sharemilkers' section chairman Jeff Bolstad said the restructure package announced on Friday does not answer the "real question" facing Fonterra reports The NZ Herald. "We can fund NZ [business] as we've always done here, there's no question. More retentions [from payout] will be the next step. But if Fonterra is going to play with the Nestle's and Kraft's of this world it's going to need outside capital." NZ is thought to have around 4000 sharemilkers. Last year their herds produced 40 per cent of the nearly 14 billion litres of milk Fonterra collected. Many sharemilkers also own farms and most have an eye to farm ownership, making them the future of the $20 billion dairy industry. Fonterra, which controls more than 90% of the country's raw milk supply needs more capital to address the risk to its balance sheet of its farmers cashing in their redeemable shares, and to fund global and domestic growth ambitions. Last week it announced a plan to rejig its capital structure. In recognition of farmer-shareholder determination to retain 100 % control and ownership, the three-step proposal offers no prospect of a market listing of shares, though it suggests a move at step three to share trading among farmers. Bolstad said the question of whether sharemilkers were as energised as farm owners about retaining 100% control had not been canvassed.

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