Job losses expected in Fonterra review

Fonterra chief executive Theo Spierings.
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Fonterra chief executive Theo Spierings.

Fonterra is set to shed hundreds of jobs in a management review that will restructure the business as the cooperative struggles to combat the slump in dairy prices.

Fonterra chief executive Theo Spierings said the review was all encompassing and would cover everything from procurement, working capital and where cost savings could be made in what was a difficult economic environment.

"What I do know is that we need much less support function and more people selling and producing stuff.

"So in one area we'll see more people in sales and production based on our growth strategy and less people in a support function."

Spierings said the review was to help produce cash for the co-operative to help farmers struggling with the low payout environment.

There could potentially be hundreds of losses in the group functions and support roles, but there were job opportunities in the market and production areas of the business where they would be re-trained, he said.

Some of the people facing redundancy may gain new jobs in production while others will not, he said.

"I have no problem when there's people in the selling and producing [function]. I want more of that and less in support."

He said the exact numbers of the job cuts would not be known until the review was completed in August and there was no information available on what regions the job losses would take place.

When asked if his role as chief executive was under review, he said: "Everything is under scope. I'm leading it and we have come a long way with capital structure strategy, we have had a few crises, we are well placed and we will succeed."

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Fonterra Group Shares had a slight fall of 0.21 per cent to $4.70 on NZZx's Fonterra Shareholders' Market.

The news came as Finance Minister  Bill English issued a sombre warning for the dairy sector, saying things will get worse before they get better. 

"The next three months are going to be grim, the worst in four years," he said.

Professor of agribusiness at Waikato University Jacqueline Rowarth said Fonterra had to start adding more value to its products and the industry must move away from producing just more milk powder.

Federated Farmers dairy chairman Andrew Hoggard said the news of the layoffs was "sudden".

"I hope it's not a knee-jerk reaction and there's a solid background to it. It doesn't fill me with confidence that decisions are being well thought through," Hoggard said.

Speaking at Fieldays, he said it was "interesting timing".

"What's the point of a review if we have already made a decision?"

The announcement gave the impression Fonterra was reacting to recent criticism by its farmer shareholders around the cooperative's performance.

"Given how things have played out, that's what a lot of people are going to assume. Whether it is or not, I don't know, but the fact they're doing a review, and you announce a whole bunch of stuff before the review is completed, it does lead people to look in that way."

It was not Fonterra's first review and Hoggard questioned whether the disruption it caused its employees was part of the reason why the co-operative was not performing as well as it could be.

 - Stuff

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