Market awaits Fonterra trading plan

The sharemarket is looking for a firm steer on whether Fonterra’s contentious share trading among farmers scheme is a goer, when the dairy giant presents its half-year results this week.

Analysts and brokers expect an update when New Zealand’s biggest company makes a ‘‘strategy refresh’’ presentation on Thursday morning along with its sixmonth results.

Analysts say they particularly want to hear what recently appointed chief executive Theo Spierings has to say about the farmer-owned co-operative’s direction, given uncertainty around share trading among farmers (TAF) and China’s economic slowdown.

The investment community was divided this week on whether TAF, which would offer outside investors dividendcarrying Nzx-listed units of Fonterra shares, can survive emerging farmershareholder distaste for the scheme.

But there is also growing speculation in the dairy industry, of which Fonterra controls 90 per cent, that if the company does not get TAF launched, the Government will legislate to remove its entitlement to set the national milk price and a restricted share value. Observers said there was a strong ‘‘political motive’’ for change in Fonterra’s capital structure, spurred by the likes of the United States dairy lobby, which says Fonterra’s near-monopoly is state supported.

Fonterra directors are promoting TAF as a way to secure permanent capital to fund Fonterra’s growth strategies, and while they believe they got a mandate for it from farmers in 2010, there is unease among shareholders that it will lead to them losing control and ownership of the company to sharemarket investors.

A prominent market analyst, who declined to be named, told the Waikato Times TAF ‘‘isn’t going to happen because farmers are totally opposed to it’’.

‘‘Fonterra could be one of the world’s great companies . . . but now it’ll be just OK. It’s not going to achieve its potential.’’

It had become apparent there was a disconnect between what Fonterra directors were pushing for, and what their shareholders wanted, he said.

‘‘It’s like they don’t know what’s going on in the shareholder base. It’s going nowhere.’’

Farmers were ‘‘too conservative and too concerned about the price they get for their milk [as opposed to dividends]’’ to allow TAF to go through.