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Reading Time: 2 minutes Fonterra’s sale of its consumer and Mainland businesses to Lactalis is not a “short-sighted sugar hit” as New Zealand First leader Winston Peters claims, but it will give shareholder Andrew McGiven an unexpected cash injection into his Te Aroha farm business. It will provide a nest egg if dairy prices fall or if on farm costs rise like they have done in the past, he said. Farmer-shareholders voted overwhelmingly in favour of the sale with 88.47% in support of it and 80.59% casting their vote from a milk solids perspective. The final votes on the divestment were cast at a virtual special meeting held on October 30. The high percentage of Fonterra shareholders who backed the sale of its consumer business to French dairy company Lactalis gave the board the mandate it needed to proceed. While the vote only needed 50%, the decision was that contentious that a strong majority was needed, he said. “It’s a clear mandate that the shareholders agree with what the directors have been telling us over the past few months.” McGiven is a fully shared up farmer and is aware that while they are enjoying positive returns at the moment, dairy prices are cyclical and those bad times could return. “A lot of this will be consolidating debt and doing some essential R&M and fixing the balance sheets up.” It also felt like a payback from when farmers had to buy the shares early on to match their production and the price fell, leaving many with a capital loss, he said. “It’s nice to claw some of that back. “As a farmer going forward, my hopes for Fonterra would be that they are able to concentrate and improve efforts in the food service and ingredients business and get better returns out of them which will hopefully keep the milk price up as well as improving share price and dividend.” The pressure will also be on Fonterra management to deliver over the next few years once the newly shaped business is in place. “They have certainly reduced the amount of excuses they have put forward now with getting rid of one business. I think farmers will certainly be expecting a more focused effort on those two remaining business arms.” Fonterra CEO Miles Hurrell outlined those targets at the special meeting where shareholders voted on the sale. These included an average return on capital of 10-12% above the five-year average, maintaining the highest sustainable farmgate milk price possible and earning to be at the 2025 financial year levels within three years – offsetting the earnings impact of the divestment and returning more earnings to shareholders through a dividend policy of 60-80%. Farmers Weekly Poll
