-
Henry van der Heyden - Source: ONE News -
Watch Video
-
Related
Fonterra's long awaited capital restructuring plan seems to have gone down well with farmers so far, but is the three-step plan raise enough money for Fonterra?
The dairy co-operative on Friday announced its plan to address its redemption risk and raise capital as it forges ahead as a global food group.
Fonterra has proposed a three-stage capital restructure that includes strengthening its share structure by making an extra 20% available to farmers; restricting share value; and letting farmers trade shares between themselves rather than solely through the co-operative.
Fonterra chairman Henry van der Heyden says farmer response so far is positive and the co-op is confident that plan will bring in enough capital for at least for the next five years of its strategy.
He says much of the capital will be spent in New Zealand putting new facilities in place to cope with growing milk production, as well as tending to its logistics and supply chains.
And, he is confident that the proposal will make for a liquid enough market.
"But I'll keep coming back to the key point here: the biggest risk facing Fonterra today is actually our redemption risk and we need to remove this redemption risk and trading among farmers will actually help us remove that.
"We have so much equity and so much capital wash in and out of the co-operative at the end of the season. Trading amongst farmers actually helps us and actually stops the redemption risk we've been talking about for a long time," he says.
Fonterra has ruled out outside investment but it has alluded to the future options such as friendly pension funds, expanding the 20% extra shares available, and retaining more of season payouts.
Meanwhile, NZ Farmers Weekly editor Tim Fulton says the proposal bridges Fonterra's immediate gap but it is not an exciting proposition for the non-farmer investment community.
"I don't think it's a real game buster for the company...it doesn't allow them to heavily invest in new retail markets and fresh markets," he says.
However, he says the simple structure of the changes are appealing and he expects farmers to endorse the proposal come voting time in November.
