Monday, 30 September 2024 10:50

Revised strategy to grow value for shareholders, unit holders

Written by  Sudesh Kissun
Fonterra has unveiled a revised strategy – to maximise farmgate milk price and setting higher targets for dividends and return on capital for shareholders and unit holders. Fonterra has unveiled a revised strategy – to maximise farmgate milk price and setting higher targets for dividends and return on capital for shareholders and unit holders.

Fonterra has unveiled a revised strategy – to maximise farmgate milk price and setting higher targets for dividends and return on capital for shareholders and unit holders.

At the same time, the co-op has confirmed plans to divest its consumer businesses in New Zealand and around the world.

The co-op has increased its target average return on capital to 10-12%, up from 9-10%, and announced a new dividend policy of 60-80% of earnings, up from 40-60%.

“At all times, we remain committed to maintaining the maximum sustainable Farmgate Milk Price,” it says.

Fonterra chairman Peter McBride says the revised strategy creates a pathway to greater value creation, allowing the co-op to announce enhanced financial targets and policy settings.

“The co-op exists to provide stability and manage risk on farmers’ behalf, while maximising the returns to farmers from their milk and the capital they have invested in Fonterra.

“Through implementation of our strategy, we can grow returns to our owners while continuing to invest in the co-op, maintaining the financial discipline and strong balance sheet we’ve worked hard to build over recent years.

CEO Miles Hurrell says Fonterra is in a strong position, delivering results well above its five-year average, which puts it in a position to think about the next evolution of its strategic delivery.

“The foundations of our strategy – our focus on New Zealand milk, sustainability, and dairy innovation and science – remain unchanged. What’s changed is how we play to these strengths.

“Following our recent strategic review, we are clear on the parts of the business that create the most value today and where there is further headroom for growth. These are our innovative Ingredients and Foodservice businesses, supported by efficient and flexible operations.

“By streamlining the co-op to focus on these areas, we can grow greater value for farmer shareholders and unit holders, even if we divest our Consumer businesses,” says Hurrell.

Fonterra’s revised targets

  • Return on capital: 10-12% (FY18-23 average - 8.6%)
  • Dividend policy: 60-80% ((FY18-23 average - 50%)
  • Gearing Ratio: 30-40% (FY18-23 average - 35%)
  • Debt to EBITDA: 2-3x (FY18-23 average - 2.5x)
  • Capital investment requirements: $1 billion per annum in essential, sustainability and growth capital ((FY18-23 average - $650m)
  • Emissions reductions by 2030 (from an FY18 base year) – Absolute Scope 1&2 emissions: 50%, on-farm emissions intensity Scope 3: 30%

More like this

Fonterra urged to seek extension to GMO bill consultation

With less than a week to go before submissions close on the Government’s controversial Gene Technology Bill, two agribusiness executives - John Greenberg and Michael Henne - are calling on Fonterra to demand an extension to the submission period.

Bovaer's fate

OPINION: The fate of methane inhibitor Bovaer in NZ farming is still up in the air.

$10 milk price still on

Whole milk powder prices on Global Dairy Trade (GDT) remains above long run averages and a $10/kgMS milk price for the season remains on the card, says ASB senior economist Chris Tennent-Brown.

Featured

Crush death triggers on-farm traffic alert

Following a sentencing for a death at a South Canterbury agribusiness, WorkSafe New Zealand is calling on farmers to consider how vehicles move inside their barns and sheds.

Vegetable growing at risk

Horticulture New Zealand says the country’s ability to provide fresh, healthy vegetables is at risk unless the Government makes growing them a permitted activity.

Industry monitoring dry conditions

While it has been a great spring and summer for farmers, soil moisture levels in the Waikato are now plummeting as the dry February starts to bite.

National

Top dairy CEO quits

Arguably one of the country's top dairy company's chief executives, Richard Wyeth has abruptly quit Chinese owned Westland Milk Products…

DairyNZ seeks more cash

For the first time in 17 years, DairyNZ wants farmers to contribute more cash to run the industry-good organisation.

EPA's plan 'not good enough'

The Environmental Protection Authority (EPA) is bolstering its frontline applications teams in a bid to reduce the timeframe for new…

Machinery & Products

New home for JCB Agriculture

Power Farming has announced a new chapter in its partnership with JCB, which having represented the UK-based company’s construction equipment…

CAT's 100th anniversary

While instantly recognised as the major player in construction equipment, Caterpillar Inc, more commonly known as CAT, has its roots…

» Latest Print Issues Online

The Hound

Ruth reckons

OPINION: Ruth Richardson, architect of the 1991 ‘Mother of all Budgets’ and the economic reforms dubbed ‘Ruthanasia’, added her two…

Veg, no meat?

OPINION: Why do vegans and others opposed to eating meat try to convince others that a plant based diet is…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter