Result day looms large for Fonterra

Aweek is a long time in politics but for Fonterra’s leaders the month between their shock financial forecast on August 12 and D-day on September 12 must be feeling like an eon. Hardly a day has since passed without some bruising revelation, opinion or headline-making development about the dairy company we believed was our global business champion but now seems to have fundamental flaws.

The knives are out. Wielded not just within Fonterra, where we are assured radical exploratory surgery is being performed by new leadership — thus the bad news of August 12, but also by the public which feels cheated, by politicians inevitably seizing the day, and by some of Fonterra’s 10,000 farmer-owners who have had $4 billion wiped off their balance sheets in the past two financial years. The I-told-you-so brigade has also had a say. Fonterra unbelievers were scarce back in 1999 when competition watchdog the Commerce Commission rejected a plan by dairy industry tsars for a sector mega-merger to create an export goliath to blaze a global trail for New Zealand dairy.

They were few, but vocal, predicting exactly the sort of commercial pickle that Fonterra has got itself into. Too slow, too complacent, too top heavy, too complex — and too easy to hide failures in.

But a new incoming Government led by Labour’s Helen Clark liked the export juggernaut idea and passed special legislation enabling the merger, neatly avoiding the need for commission approval.

It meant Fonterra got a privileged start and most of country’s milk supply (at last count it was still 80 per cent). That silver spoon beginning, coupled with Fonterra’s eye-wateringly fat executive pay packets, might explain why the public feels entitled to join the rush to condemn. And, rightly or wrongly, the outcry over freshwater pollution gets laid at Fonterra’s door too.

What remains a mystery is why Fonterra’s farmer-owners aren’t marching in the streets. Next to “how was this allowed to happen?”, it’s the public’s most enduring question.

After all, Fonterra’s showed signs of losing its way for a while. Poorly judged and researched overseas investments, suggestions of “jobs for the boys” on the board, big salaries in years of losses and growing questions about senior management as debt spiralled.

One of the more unpleasant truths underlined in commentary after the August 12 bombshell is that in the past six years Fonterra’s total debt has increased by nearly $3b to $7.8b and 56 per cent of its asset expansion has been funded through debt. But now is the time to look forward.

Time to give newish chief executive Miles Hurrell breathing room to work his strategy for turning the ship around.

While Fonterra keeps its high credit rating and the milk pours in it is mischievous and destructive to suggest, as some people have lately, that the company is failing.

But please Fonterra, no more nasty surprises next Thursday.