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Source: ONE News -
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AgResearch CEO Andrew West says Fonterra's capital restructure will likely include a call to farmers for capital so it can take advantage of growth opportunities.
Fonterra will on Friday afternoon reveal its plans for a capital restructure as part of its bid to evolve from a bulk exporter of commodities to a global food player.
"There's a very good place to be in high value ingredients and I think that's probably where the company wants to be," says West.
The dairy giant has already announced a public listing will not be part of its proposal, though there has been talk of a 'dry' share unrelated to milk production in which farmers can invest.
It has been a tough time for dairy farmers lately. This season's payout forecast of $4.55 per kilo of milk solids is 65 cents lower than last season's forecast payout and is down from a high of $7.66/kg in the middle of last year.
The 65-cent drop works out at an average of about $70,000 less for each farmer, so whether farmers will support a call for additional capital remains to be seen.
But West says there is an argument that it is good for farmers to invest in their company as well as their farm. Fonterra, after all, has been built up by farmers over the years.
"I've got a lot of sympathy for dairy farmers wanting to take this very carefully and pretty slowly as this is New Zealand's best company and we've got to own it and control it pretty carefully, develop it carefully.
"They don't want to lose control of the company, or if they do start to dilute control they want to do it slowly in a measured way and I think that's pretty reasonable."
West's own view is that mum and dad investors should be able to invest in Fonterra some time in the future, and that the company should stay firmly in New Zealand's control.
"I think if eventually we can arrive at that point then I think it will be really good for dairy and really good for New Zealand," he says.
West says Fonterra's announcement on Friday will not be the be all and end all of its capital restructure process. He says the restructure will evolve and eventually there may be a debate about the need for equity from other sources.
Fonterra needs 75% of farmer-shareholder support to get proposed changes across the line.
Watch ONE News at 6pm for the latest on Fonterra's
capital restructure with TVNZ's business editor Corin
Dann.
