close
MENU
2 mins to read

Fonterra hits ‘sweet spot’ but challenges remain

“We are in very, very good shape.” That is how Fonterra chairman Henry van der Heyden summed up the country's largest company at today's annual meeting in the small Taranaki town of Hawera.Despite a tough start to the current season Fonterra r

Duncan Bridgeman
Thu, 18 Nov 2010

“We are in very, very good shape.” That is how Fonterra chairman Henry van der Heyden summed up the country’s largest company at today’s annual meeting in the small Taranaki town of Hawera.

Despite a tough start to the current season Fonterra reached a record company peak and there was now real momentum in the business, he said.

And farmers were starting to smile again with the prospect of a final payout of $6.85-$6.95 per kg of milk solids.

“A lot of farms need that extra cash flow right now and it’s bringing a few smiles back,” Sir Henry told about 200 shareholders at Hawera’s new TSB Hub sports centre.

There were still challenges ahead, however, with a still relatively weak global economy with potential for economic slowdown, volatile markets and the high exchange rate for exporters.

While global markets were volatile the dairy fundamentals remained good on both the supply and demand sides, he said, adding that dairy returns should stay well ahead of long-run averages.

“As I stand here today, I can’t think of a better business to be in – and I can’t think of a better time to be a Fonterra dairy farmer,” Sir Henry said.

During the year Fonterra strengthened its balance sheet and is now working on delivering the next phase of its capital restructure plan.

The co-operative’s debt position at balance date stood at $4.5 billion, more than $700 million lower than a year earlier, with its gearing ratio down from 53% to just under 45%.

Chief executive Andrew Ferrier said Fonterra was well positioned for the future after recording a net profit of $685 million, 12% higher than the previous year.

“From my perspective, Fonterra has really hit its straps this year. We achieved a lot at a time when many companies were still trying to fight their way out of the recession.

“This time last year I stood in Ashburton saying it was good to have a forecast for this season having a six in front of it. This year, I could say the same about a forecast starting around a 7.”

The mood of farmer shareholder in attendance was generally positive, although some were concerned about the co-operative’s image in the minds of the rest of New Zealand.

There was agreement that broad issues such as sustainable farming and caring for the environment must be endorsed not just for the long term benefit of farmers but also to get support of the wider public.

Duncan Bridgeman
Thu, 18 Nov 2010
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Fonterra hits ‘sweet spot’ but challenges remain
10473