Fonterra ‘trimming the sails’ review due in weeks

Fonterra is currently undergoing a review of its structure and management and is expected to report back to its farmer shareholders in the coming weeks.

Theo Spierings, CEO of Fonterra – New Zealand’s largest company, told Radio New Zealand that it has pulled in key talent from all over the world to look at the situation.

“The current process with McKinsey is trimming the sails,” he said, “and is a complete business review. We want to have a fresh set of eyes.”

The move comes at a time when Fonterra has come in for severe criticism over the price it’s paying its farmers, its structure and product make up.

However, Spierings said the Fonterra house “is in order” and the company has a strong engine that can cope with volatility.

“But the volatility we have right now is so severe and there is definitely pressure on farmers’ balance sheets.”

Global Dairy Trade

“This financial year we are selling 26% of our solids on the Global Dairy Trade and that used to be over 40%, so we are selling less on that platform and that should drive a stronger milk price.”

He also addressed concerned around the number of highly-paid staff on its books.

Fonterra has 17 people on its pay roll of more than NZ$1m a a year (€634,000), he said, but that four or five years ago it had 29 on those salary levels, and that number is reducing.

He disagreed with suggestions that Fonterra is trying to do too much, from milk processing to marketing of end product.

“You should see us like a refinery. We make a product and there are always by-products. If you start splitting the company you create in-efficiencies and in-effictiveness and you start to lose value.”