Fonterra Focus On Growth And Durability

The decisions made by farmer shareholders over the past decade have laid a strong, durable foundation for Fonterra’s future growth and profitability, said Sir Henry van der Heyden at Fonterra’s Annual Meeting in Hamilton.

17 Dec 2012 --- The decisions made by farmer shareholders over the past decade have laid a strong, durable foundation for Fonterra’s future growth and profitability, said Sir Henry van der Heyden at Fonterra’s Annual Meeting in Hamilton.

In his final Chairman’s address, Sir Henry said when he took the job on, he wanted to make a difference and leave the Co-operative in a better position at the end of his tenure.

Taking stock of the changes within the industry over the past 10 -15 years, Sir Henry reflected on the important decisions that had strengthened Fonterra’s global position and returns to farmers.

“It’s been one huge year after another and every one of them has made us stronger.

“Together we’ve turned a collection of co-ops into the world’s top dairy exporter.

“Creating Fonterra was a massive leap of faith on two levels.  We put our faith in a single integrated model – and we put our faith in it succeeding in an entirely deregulated market.  I can say without a shadow of a doubt that we pulled it off,” he said.

“Fonterra came out of the blocks with $11.8 billion in assets.  We have grown that by 28 per cent to $15 billion.  That’s an outstanding performance.

“We have done what we set out to do – grow farmers’ wealth ¬– and that’s come through in the value of your land, your shares and your earnings on the farm.”

Sir Henry said global demand for dairy was the strongest it had ever been and was growing.

“We need to use all of our muscle to push ahead and stay ahead.  But we will do it our way.  History has shown we are not afraid to make the big calls and make big changes without trading what is really important.”

Chief Executive Theo Spierings said since Fonterra’s formation in 2001, the Board and farmer shareholders had made the tough decisions required to position the Co-operative for growth.

“Establishing a Fair Value Share, achieving a transparent Milk Price, and introducing a dividend policy were the first three hurdles.  This year, Trading Among Farmers has delivered permanent share capital and a stable capital base.

“Looking ahead, our business strategy is to grow volumes, grow value, generate more cash and improve our return on capital. To deliver on this, our future priorities are to:

- Shift more ingredients sales direct to customers and generate prices higher than Global Dairy Trade;
- Grow consumer and foodservice volumes;
- Align our costs and spending so we have the money to invest in areas that will generate growth; and
- Maintain a balance between environmental, economic and social sustainability.

“We have to start thinking differently about cost – and have already started doing this with our focus on reducing costs by $60 million this financial year.”

Building a durable co-operative for the future meant Fonterra had to align spending, to make sure resources were directed to the right priorities, said Mr Spierings.