Fonterra plan aims to increase flexibility

18:36, Feb 27 2013

Dairy giant Fonterra has provided the details of a five-point plan it says will give its farmer-shareholders more flexibility in managing their farm businesses.

Fonterra said the aim was to support and boost milk production to support the co-operative's growth strategy.

The plan's five points include a bonus issue of one additional Fonterra share or unit for every 40 held on April 12, 2013.

The bonus issue would automatically provide all shareholders and unit-holders with free additional shares and units on April 24.

"Based on current production levels, the bonus issue means around 95 per cent of farmer shareholders will not need to buy additional shares next season to match any increase in production," Fonterra chairman John Wilson said. Also, there would be a further supply offer enabling shareholders to sell the economic rights of some of their shares into the Fonterra Shareholders' Fund.

There would also be a dividend reinvestment plan enabling shareholders and unit-holders to elect to receive dividends as shares or units.


There would be flexible contracts to give new farmers and farmers in expansion mode more time and options to fully back their milk production with Fonterra shares. And there would be new opportunities for winter milk supply contracts in the upper North Island to fuel Fonterra's new long-life (ultra-heat treated) milk processing plant to be built at Waitoa in the Waikato.

Wilson said the co-operative was committed to providing flexibility to help farmers manage their shareholdings.

"Milk is the life blood of the co- operative. For Fonterra to grow, we need our farmers to grow. With a stable capital base [from Trading Among Farmers], we now have certainty and can offer farmers more ways to grow milk supply and give them more time to share up."

Chief executive Theo Spierings said unit-holders who had chosen to invest in Fonterra's continuing performance would also benefit.

He said the initiatives were planned before the launch of the Fonterra Shareholders' Market and Fonterra Shareholders' Fund, and were referred to in the offer documents. "Now is the right time to implement them," he said.

In a separate announcement, Fonterra confirmed its forecast farm-gate milk price for the current season of $5.50 per kilogram of milksolids. The payout forecast range for the 2012-2013 season is confirmed at $5.90-$6 before retentions for a fully shared-up farmer, with the forecast earnings per share range staying at 40-50 cents.

Taranaki Daily News