Editorial: Sensible move
OPINION: The Government's decision to rule out changes to Fringe Benefit Tax (FBT) that would cost every farmer thousands of dollars annually, is sensible.
Farmers are flabbergasted to learn that Fonterra borrowed money to pay dividends over the last few years.
A Fonterra supplier meeting at Matamata heard that the board has now changed this policy: future dividends shouldn’t require the co-op taking on more debt.
Federated Farmers Waikato president Andrew McGiven says it’s hard to fathom why this was done.
“Maybe it was pressure to hit numbers for performance incentives,” he told Rural News.
McGiven says for many farmers the worst business practice is to pay a perceived profit from debt.
“It was interesting and alarming, to say the least, how over the last few years that dividend was paid: it was essentially borrowed money to pay these.
“The directors present [at the meeting] put up their hands to say this has now stopped and the company now needs to focus on making cash profits while decreasing debt.”
The Matamata meeting was attended by directors Leonie Guiney and Andy Macfarlane.
In 2015, Fonterra paid 25c dividend, in 2016 40c, in 2017 40c, and in 2018 10c.
This year the co-op did not pay a dividend after posting a $605 million loss, mostly via writedowns of assets to the tune of $826m.
A Fonterra spokeswoman told Rural News that in past years its dividend “was funded through debt at times”.
This approach has now changed, she says.
“Previously, the dividend policy included the consideration of near term earnings projections, investment priorities, gearing targets and existing or likely market conditions that may impact Fonterra or our shareholders.
“Our new dividend policy guidelines state that the payment of a dividend should not require our co-op to take on more debt or reduce our co-op’s ability to service existing debt.”
Last month, Fonterra also announced a change in strategy, moving away from supplementary global milk pools to a NZ-based milk pool.
Fonterra chairman John Monaghan says the new strategy sounds simple and the best strategies often are.
“Simplicity shouldn’t be confused with a lack of ambition,” he said.
Fonterra’s earnings range forecast for 2019-20 starts at 15-25 cents/share. The five year plan is to achieve a target of 50c/share.
Managing director of Woolover Ltd, David Brown, has put a lot of effort into verifying what seems intuitive, that keeping newborn stock's core temperature stable pays dividends by helping them realise their full genetic potential.
Within the next 10 years, New Zealand agriculture will need to manage its largest-ever intergenerational transfer of wealth, conservatively valued at $150 billion in farming assets.
Boutique Waikato cheese producer Meyer Cheese is investing in a new $3.5 million facility, designed to boost capacity and enhance the company's sustainability credentials.
OPINION: The Government's decision to rule out changes to Fringe Benefit Tax (FBT) that would cost every farmer thousands of dollars annually, is sensible.
Compensation assistance for farmers impacted by Mycoplama bovis is being wound up.
Selecting the reverse gear quicker than a lovestruck boyfriend who has met the in-laws for the first time, the Coalition Government has confirmed that the proposal to amend Fringe Benefit Tax (FBT) charged against farm utes has been canned.
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