Fonterra Farmers Demand Stronger Payouts and Dividends
Source: DairyNews.today
Fonterra’s farmers are calling on the dairy co-operative to deliver consistent and robust payouts, along with strong returns on their share investments. Rising costs are straining farmer profits, with the latest DairyNZ breakeven milk price exceeding $8/kgMS, according to Fonterra Co-operative Council Chair John Stevenson.
“Over the past 24 months, many farmers have felt substantial financial pressure,” Stevenson told Rural News. “Fonterra needs to execute its revised strategy to ensure our returns significantly outpace our costs.”
Last week, Fonterra unveiled a revised strategy, aiming to bolster its Ingredients and Foodservice businesses to increase value for farmer shareholders and unit holders. The revised targets include raising the average return on capital to 10-12%, up from 9-10%, and implementing a new dividend policy to distribute 60-80% of earnings, compared to the previous 40-60%, while still maintaining the maximum sustainable Farmgate Milk Price.
Peter McBride, Fonterra’s Chairman, highlighted that the updated strategy is designed to drive greater value creation. “The co-op exists to provide stability and manage risk on behalf of farmers, while maximizing returns from milk and invested capital. By implementing this strategy, we can enhance returns for our owners and continue investing in the co-op, maintaining the financial discipline and strong balance sheet that we have built over recent years.”
Farmers have responded positively to the new targets, according to Stevenson, who emphasized that delivery on these targets would translate into stronger returns for Fonterra farmers alongside significant investment in the cooperative’s growth.
“The Council views performance as crucial to the success of this strategy, and we’ll be closely monitoring and reporting on Fonterra’s execution against these objectives,” Stevenson added. He stressed the importance of a competitive milk price, especially in light of fierce competition for milk from other processors. “A strong, sustainable milk price is vital for our farmers, but business performance is equally critical. It’s encouraging to see the strategy focus on delivering a stronger farmer offering, including enhanced payouts and improved cash flow.”
Fonterra is also advancing its plans to divest its consumer businesses in New Zealand, Australia, and Sri Lanka. The cooperative has confirmed that the divestment process is ongoing and progressing well.
Last week, Fonterra unveiled a revised strategy, aiming to bolster its Ingredients and Foodservice businesses to increase value for farmer shareholders and unit holders. The revised targets include raising the average return on capital to 10-12%, up from 9-10%, and implementing a new dividend policy to distribute 60-80% of earnings, compared to the previous 40-60%, while still maintaining the maximum sustainable Farmgate Milk Price.
Peter McBride, Fonterra’s Chairman, highlighted that the updated strategy is designed to drive greater value creation. “The co-op exists to provide stability and manage risk on behalf of farmers, while maximizing returns from milk and invested capital. By implementing this strategy, we can enhance returns for our owners and continue investing in the co-op, maintaining the financial discipline and strong balance sheet that we have built over recent years.”
Farmers have responded positively to the new targets, according to Stevenson, who emphasized that delivery on these targets would translate into stronger returns for Fonterra farmers alongside significant investment in the cooperative’s growth.
“The Council views performance as crucial to the success of this strategy, and we’ll be closely monitoring and reporting on Fonterra’s execution against these objectives,” Stevenson added. He stressed the importance of a competitive milk price, especially in light of fierce competition for milk from other processors. “A strong, sustainable milk price is vital for our farmers, but business performance is equally critical. It’s encouraging to see the strategy focus on delivering a stronger farmer offering, including enhanced payouts and improved cash flow.”
Fonterra is also advancing its plans to divest its consumer businesses in New Zealand, Australia, and Sri Lanka. The cooperative has confirmed that the divestment process is ongoing and progressing well.
