Fonterra says some aspects of the dairy industry regulations are “tipping the playing field in favour of foreign exporters, at the expense of Kiwi farmers”.
“It relies on us doing a number of things differently,” he says.
The co-op is taking stock of the business -- reviewing all investments, major assets and partnerships to ensure they still meet today’s needs.
“This will involve a thorough analysis of whether they directly support the strategy, are hitting their target return on capital and whether it can scale them up and grow more value over the next two-three years,” he says.
“This will start with a strategic review of the cooperative’s investment in Chinese baby food company Beingmate.”
Fonterra is also looking at “getting the basics right” and has begun acting to fix the businesses that are not performing.
Hurrell says financial discipline will be lifted throughout the co-op so debt can be reduced and return on capital improved.
Farmers will get more accurate forecasting.
The business will be run on more realistic forecasts with a clear line of sight on potential opportunities and the risks.
“It will also be clear on its assumptions, so farmers and unitholders know exactly where they stand and can make the decisions that are right for them and their businesses.”
Chairman John Monaghan says the co-operative is being clear with farmers and unitholders on what it will take to achieve the forecast earnings.
“For the first time, we are sharing some business unit specific forecasts. Among others, these see the ingredients and consumer and foodservice businesses achieving an EBIT of between $850 million and $950m, and between $540m and $590m, respectively.
“FY19 is about lifting the performance of our cooperative.
“We are taking a close look at the cooperative’s current portfolio and direction to see where change is needed to do things faster, reduce costs and deliver higher returns on our capital investments.
“This includes an assessment of all the cooperative’s investments, major assets and partnerships against our strategy and target return on capital.