Great Result for Farmers Following Challenging Year
Great Result for Farmers Following Challenging Year for Co-Op
Fonterra Shareholders’ Council Chairman, Ian Brown said the 2013/14 season was one of real complexities for the Co-operative yet produced a great result for Farmers.
Mr Brown: “The farmgate Milk Price of $8.40 per kg/MS has come on the back of a season in which good production was supported by strong demand and high prices.”
“This will be very well received by Farmers.”
Mr Brown said it was important to recognise that the same factors which positively affected the farmgate Milk Price, such as the demand for milk powders, contributed to the challenges faced by the business in terms of profit as evidenced by the Earnings Before Interest and Tax (EBIT) figures.
“The significant increase in Milk Price compared to the prior season had a real effect on the business and Fonterra struggled to pass this extra cost onto customers.
“At the end of the season the record $8.50 payout for a fully shared up Farmer is a great result.”
Mr Brown noted that the season, while very good for Farmers, had produced a number of challenges for the Co-op.
“In terms of the Milk Price adjustment the Board made the decision based on their duty to protect the Co-op.
“The Council supported the Board’s rationale for this decision and our view is that borrowing money to distribute revenues that weren’t earned in order to meet the Milk Price Panel’s recommendations would not have been in the best interest of our Farmers.
“However, as we have stated clearly throughout the year the Council will reach a view on the consequences of this decision when it has completed its review of the final numbers for the season which is currently taking place.
“The Board has also undertaken some significant steps in terms of implementation of the strategy via local and international investment.
“The Council supported these investments as they align with the Fonterra strategy to optimise New Zealand milk and should increase our ability to add value over the Milk Price.
“Farmers will want to see tangible returns on these investments in both the short and long term.”
Mr Brown said that the Council is reviewing the Annual Results figures as part of its monitoring role and will provide more detailed analysis in its Annual Report which will be available in mid-October.