Report claims Fonterra failed shareholders

Fonterra has failed to deliver meaningful returns to its farmer shareholders since its inception, a report has found.

The analysis of findings carried out by Northington Partners on behalf of the Fonterra Shareholders’ Council claims New Zealand’s largest dairy cooperative has failed to deliver meaningful returns over and above the cost of capital since its inception.

It says that while milk growth over the past 15 years has been an impediment that is now largely historical, it is “critical” that the poor returns be addressed to ensure continued milk and capital.

It also found that milk price continues to be the greatest driver for onfarm profitability and that given the relationship between milk price and earnings it is important that shareholders look at the total available for payout as a true measure.

Shareholders’ Council chairman Duncan Coull said despite the findings it still believed the cooperative structure was what worked best.

“Notwithstanding the findings of this report, the council remains firmly of the view that the co-operative structure is the only structure that will provide for the enduring needs of our intergenerational farming families,” he said.

Coull said it commissioned the independent report in June after criticism about Fonterra’s performance from shareholders and the media.