Fonterra conf irms plans for new capital structure in March after law change
Fonterra expects to implement its new capital structure in late March after relevant legislative changes were passed in Parliament late Thursday evening.
The country’s largest dairy company will adopt a more flexible shareholding structure to make it easier for new farmers to join the cooperative and for existing farmers to remain, by allowing greater flexibility in the level of investment required.
Fonterra’s farmer suppliers voted in favour of the proposal in December last year, but the plan also required changes to the Dairy Industry Restructuring Act under which Fonterra was formed in 2001.
Fonterra chairperson Peter McBride said the passing of the relevant legislation in Parliament late Thursday evening provided farmers the clarity they have been wanting.
‘‘This milestone gives us the confidence to put in place the transition to our flexible shareholding structure,’’ he said in a statement to the NZX yesterday.
Fonterra is reshaping its business as a period of rapid expansion in the country’s dairy herd comes to an end as dairy farming faces increased regulation to reduce its environmental impact.
McBride said flexible shareholding will help Fonterra maintain a sustainable milk supply, protect farmer ownership and control, and support a stable balance sheet.
Fonterra’s rivals, who have spoken out against the changes, don’t require farmer suppliers to buy shares, and the co-operative has cited its high level of compulsory investment as one of the most influential reasons for farmers leaving the co-operative. Its share of the country’s milk pool has fallen to 79% from 96% since 2001.
Fonterra has said that without the changes, it was concerned it would continue to lose market share, with its milk supply potentially falling by as much as 20% by 2030, making it less efficient and unable to pay farmers as high a price for their milk, or invest back in the business.
Although Fonterra argued that the changes would increase competition and provide more choice for farmers, its rivals said the changes would strengthen the company’s market dominance.
The co-operative plans to confirm the final implementation date for the changes when it announces its first half result, currently scheduled for March 16 next year.