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“Working Together” - John Roadley Speech

“Working Together”

John Roadley

Chairman

Opening of WestpacTrust Whareroa Research Centre

Whareroa

Taranaki

New Zealand

11.00 am

Tuesday 5 March 2002

(New Zealand Time)

Philip Luscombe, Chairman of the Taranaki Agricultural Research Science Trust; Peter Jensen, Chairman of Dexcel; Tony Bradley from WestpacTrust; Ladies and Gentlemen:

I’m delighted to be here in Taranaki today, one of Fonterra’s strongest and most important New Zealand heartlands. And I’m delighted to be at Whareroa, one of the company’s most important and most impressive manufacturing plants globally. Today has been described as a major milestone in the development of our industry’s research infrastructure. It is. It’s a day where we formally declare that a long-standing vision of the TARS Trust is now reality. On behalf of Fonterra, I thank all those who have made it happen:

- The TARS Trust, for your vision is seeing the value this land could provide to the wider industry.

- Dexcel, for your picking up of the opportunity and ensuring that this Whareroa site will make a major contribution to our 4 percent annual productivity target.

- And Westpac Trust, as well as Ballance Agri-Nutrients, for the resources you have made available to make it happen.

Fonterra is based on a very simple idea: the power of working together. Our very company was build on a promise of what can be achieved if we work together - co-operatively and collectively - rather than going it alone. It is not just about hanging together, to avoid hanging separately. It is about hanging together to capture the economies of scale and synergies that can come from all sharing a common vision and sense of direction.

Our industry has been built on unity. And, on 18 June last year, New Zealand dairy farmers voted overwhelmingly that New Zealand was simply too small for us to try to replicate our efforts across more than one major company - that our best path forward was as part of a single, united co-op. New Zealand dairy farmers rejected parochialism, and decided that their industry would be better served, not by Super 12 teams, but by one united All Black team. It was a reality understood by the Government. And it allowed our merger to be cemented 16 October last year, just over four and a half months ago.

Fonterra is both a young company and an old company. On the one hand, we are the beneficiaries of the efforts and commitment of at least three generations of dairy farmers. On the other - and people sometimes forget this - we are less than five months old. In that context, we can be very satisfied with our progress to date.

At the operational level, our staff have not dropped the ball in any respect, despite the disruption and risks any merger can bring. We have faced the challenge of yet another year of record milk production, and record peak production through the spring. Our milk collection and processing operation in New Zealand has performed magnificently. New manufacturing capacity has been brought on line at Clandeboye, Stirling, Tirau and Hautapu.

In the market, we have not been spared the effects of September 11 and the slowing of the world economy. The average value of commodity milk powder has fallen by over a quarter in just six months. But, despite that, we are confident we are on track to deliver a record payout to our supplying shareholders in our first season of operation. Our best forecast - and it is our policy to be absolutely up-front with forecasts, not to hold anything back - is that the payout will be NZ$5.30 per kilogram of milksolids.

At the same time, we are making good progress in establishing the new company and capturing the benefits of unity that we promised to shareholders. Our board consists of twelve directors, who sometimes bring as many as twelve different but valuable perspectives to issues. They are firmly focussed on the future, of ensuring Fonterra is a remarkable success.

The board has overseen the appointment of a senior management team, with New Zealand and international perspectives, balances with extensive dairy industry experiences and outside views, and which would be the envy of any other company in New Zealand as well as our international partners and competitors The CEO and his five most senior executives are now very close to having completed the appointment of the wider senior management team. Through the business, almost all senior executives have been appointed at the Corporate Centre in Auckland.

At NZMP, the New Zealand milk collection, processing and manufacturing business is being brought together successfully with our global milk-powder and other ingredients business. NEW ZEALAND MILK - our consumer arm - is in the process of integrating key New Zealand and Australian businesses with its existing world-wide network. On-farm, our Shareholder Services division is uniting to provide support and information to suppliers, at a standard that must exceed that provided by either of the legacy companies. And, nearly five years since the 1998 Industry Strategy, we have launched our project to renew our strategy, and to align all aspects of the business behind it. At every level, we are capturing the benefits of unity, that Fonterra is about.

We’re also doing it globally, with global partners. Our attitude is that Fonterra can achieve more working with the world’s leading dairy and food companies, rather than trying to do everything on our own. With Dairy America, we have become the biggest exporter of skimmilk powder out of the United States. We could never have achieved that acting independently. With Arla in the UK and Europe, we are working together to get the most from our respective brands in its highly-competitive yellow-fats market. In India, we are partnering with Britannia, which already has a national distribution network in that huge and often difficult Indian market. With Nestle, of course, we plan to establish joint ventures throughout the Americas, to make the most of our brands and its brands, and our unique skills in large-scale milk procurement, transportation and processing, combined with its unique research and product development capability. And just last week, we announced an extension of our alliance with Dairy Farmers of America to establish the first milk protein concentrate plant in the United States. None of this would have been possible had Fonterra acted alone.

And exactly the same is true with this new facility here in the Taranaki. I can assure you that this is a far more advanced and sophisticated facility than would ever have been approved by the Fonterra board had it been a Fonterra-only initiative. By partnering with the Trust, and with Dexcel, and with WestpacTrust and Ballance, we have - together - been able to develop a centre that is state of the art.

Research is critical to everything we do as an industry, and is becoming more so. It is not by accident that Fonterra is already the largest investor in R&D aside from the Government. I have spoken of a race to unlock the hidden potential of milk, which - in its own way - is every bit as competitive as the race to unlock the power of the atom last century. Milk is nature’s medicine, and those who can identify its health-promoting components and use them best commercially will have pulled off a major coup over the competition.

At the same time, we are in a productivity race that should scare every New Zealand dairy farmer. Our industry has been built on our ability to produce milk more competitively than anyone else on the planet - but the competitors are catching up. We need to move ahead - by four percent a year or better - to maintain that edge.

A good example is the “once a day milking trial” underway here at Whareroa. We’ve learned that our New Zealand cows are able to provide excellent production under a once-a-day regime. I can see the particular benefit of that down in Canterbury, reducing the stress on stock from the longer distances they often have to cover. And I hope research such as that can continue, with farmers endorsing the levy system that has recently been proposed and which we will vote on later in the year. We’ve funded research collectively, and we need to continue doing so. Our industry depends on it. Beyond science, our industry also needs to retain the community’s interest in - and support for - our industry.

This centre will contribute to all these goals. Public good research will be carried out to benefit the wider industry, and the New Zealand environment. Commercially-focussed research will assist with the company’s bottom line. And, just as importantly in its own way, this is a facility that I hope will keep the people of Taranaki connected with our business, and introduce many more New Zealanders to the grassroots of their largest and most important industry.

I commend all those who have made it happen - who got on and did it - when the alternative could have been so much less productive for this site. We have a new asset here, and one which will pay dividends for years to come to Fonterra, the dairy industry as a whole and to New Zealand. I wish all those who will work here all the best. It is my privilege as Chairman of Fonterra to declare the WestpacTrust Whareroa Research Centre officially open.

END


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