South Island farmers buy bulk of Fonterra shares

SOUTH ISLAND farmers bought most of the $271 million Fonterra dry share issue.

The co-operative says South Island farmers collectively purchased a total of 30 million of the $4.52 shares, to a total value of $135.6 million.

Taranaki and Manawatu farmers collectively bought 11.9 million shares, valued at $53.78 million.

Central North Island farmers (including Waikato and Bay of Plenty regions) purchased 14 million ($63.28m). Central South Island was the biggest purchasing region, buying up 17 million shares.

A Fonterra spokesman said the regional purchasing spread had not been broken down further than this.

Federated Farmers is applauding the $271 million invested in the co-operative by Fonterra's farmer-shareholders. "In less than stellar economic times, around one-third of Fonterra Co-operative Group's shareholders have 'shared-up'," says Lachlan McKenzie, Federated Farmers dairy chairman.

"The $271 million raised will become udders containing over half a billion dollars when bank facilities are leveraged off it. That's a sizeable amount from which to look at acquisitions that will add value to the co- operative's financial performance.

"The federation now wants to see Fonterra develop a retentions policy that will build on this war chest. While there's been much uninformed comment on Fonterra's debt, the co- operative's debt-to-debt plus equity ratio trajectory is tracking back to board guidelines of 45-55 per cent.

Late last year, Fonterra injected $53 million into its joint venture with the world's largest dairy co-operative, Royal FrieslandCampina, to acquire FrieslandCampina Domo- Pharma - a pharmaceutical grade lactose manufacturer.

Mr McKenzie said this was a pointer to what's possible going forward. "Our estimate is that at least 50 per cent of farmers do not have the ability to buy shares. The banks have tightened lending criteria while farmers are prioritising debt repayment. In both islands, farmers have a wary eye on increasingly dry conditions that affect farm budgets and their ability to buy dry shares," he said.

"When you tote these things up it's prudent but understandable that many are acting conservatively. Yet I also detect a strong wait-and-see attitude, given the internal trading mechanism is yet to be revealed.

"If you put this into a New Zealand sharemarket context, the amount raised would have been second only to the 2009 $450 million dual float of retailer Kathmandu on the NZX and ASX."

- © Fairfax NZ News