Fonterra Announcement Disappointing

10 August 2018

Fonterra Announcement Disappointing, Definitive Plan of Action Required

Duncan Coull, Chairman of the Fonterra Shareholders’ Council, has expressed his absolute disappointment with today’s Board decision to reduce the 2017/18 forecast Farmgate Milk Price by five cents to $6.70 per kg/MS in order to support the balance sheet, and the decision to retain more of the Co-op’s earnings which will likely see no further dividend payment to Shareholders over the 10 cents distributed earlier in the year.

Mr Coull: “I can understand the Board’s rationale and that it is prudent to protect the balance sheet, but the fact that we find ourselves in this situation is unacceptable.

“While Council acknowledges that part of governance is managing risk, another key responsibility is to create long term value for Shareholders. Given today’s announcement the question is ‘how effectively is this being done?’. Shareholders and all New Zealanders have valid expectations that Fonterra delivers.

“It shows that the Council-commissioned independent review into Fonterra’s value creation over time, which will be presented to Shareholders in the coming months, is timely as is the Council-led Purpose and Vision workstream which seeks to provide greater clarity as to who we are, why we exist, and the legacy our people would like to see Fonterra create.

“The Board and Management have some challenges ahead in rebuilding confidence through consistent performance and prudent management of Shareholders’ capital.

“Having effectively retained an extra 20-25 cents Council will seek to understand how this will be used and to what extent it will influence our gearing and credit rating as the strength of both is fundamental moving forward.

“The Board and Management can look forward to some very challenging discussions with Council over the coming weeks and we will be seeking a very clear understanding of the plans that are being implemented in order to restore confidence in the Shareholder base.”

ENDS

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