Milk supply will rise, van der Heyden
Outgoing Fonterra chairman Sir Henry van der Heyden says it "turns me inside out" to hear farmer-shareholders complain their share price is too high after the launch of share trading among farmers (Taf).
Van der Heyden, who passed the baton - literally, a totara fence baton from his farm - to successor John Wilson at yesterday's annual meeting near Hamilton, was responding to the claim that Fonterra will lose milk supply as its share price is now too rich for farmers to buy in.
The share price tracks the price of new units in Fonterra farmer-owned shares, listed on the NZX and ASX on November 30 as part of the introduction of the capital restructure. The units were yesterday trading at $7.01. Before Taf's launch, the share price had been held at $4.52.
"Maybe the outside world values this co-operative more than we [farmers] do," said van der Heyden. He said he did not accept that milk supply to Fonterra would do anything other than increase. Taf also introduced a trading market for farmers to trade milk supply-linked shares among themselves, relieving Fonterra of the obligation to trade its shares, and providing what directors promoted as permanent capital.
Many farmers opposed Taf, fearing the offer of units to sharemarket investors was the first step to loss of farmer control of New Zealand's biggest company. The unit IPO raised $525 million of new capital. The units carry dividends but outsiders cannot own Fonterra shares or vote. After the heat of the Taf debate, which divided the co-operative and was narrowly passed, the annual meeting was a quiet affair, attended by about 350 of Fonterra's 10,500 shareholders.
A resolution by shareholders Lachlan McKenzie and Ann Jones, which sought to cement farmer control of the Fonterra board in the constitution, attracted only 36.5 per cent support. All other resolutions, including constitutional changes to support Taf, and a 1 per cent payrise for directors and shareholder councillors, were passed.
Business high-flier Sir Ralph Norris, on the board since May and whose appointment as an independent director was ratified yesterday, said Fonterra was "unequivocally the most complex and sophisticated business I have been involved in". However, he was surprised "at the level of politics" in the company. He said he hoped New Zealanders did not take Fonterra for granted.
Veteran businessman Ralph Waters, who is staying on as an appointed director for another six months, said Fonterra management had "some of the best intellects I have seen". The Australian, who was recently named chairman of Woolworths and has been commuting between New Zealand and his Sydney home, said he had "loved every minute" of his six years on the board.
Van der Heyden, who is also staying on for six months, received only a scattered standing ovation at the end of his opening speech despite 20 years serving the dairy industry, including 10 years heading Fonterra in which its annual revenue increased from $13.7 billion to $20b. He urged shareholders to "wait and see what happens" with the share price in the next six to nine months. He said some "flexibility" could be introduced around the share price if necessary.
Farmers have three years to fully share up under Taf.
Chief executive Theo Spierings said that if the company saw milk supply fall as a result of the share price being out of farmers' reach, it would address the issue. A declining milk supply would be against the company's strategy, he said.
With the tortuous four-year capital restructure done and dusted, Fonterra would now make sustainability its No 1 focus, the meeting was told.