Home' NZ Dairy Farmer : December 2013 Contents INSTITUTIONAL investors now
hold 60 per cent of the $788 million
Fonterra Shareholders Fund.
Fonterra has confirmed the institu-
tional stake as concern emerges among
dairy farmers that dividends to Fonterra's
financial market investors will be be main-
tained despite an expected fall in profit.
In September Fonterra forecast a 2014
dividend of 32c a share, matching this
year's, while warning profits were likely to
be hit by high milk prices.
''Fonterra can draw upon its balance
sheet and cashflow performance to
support the estimated dividend,'' said
New Zealand's biggest company.
Large-scale Canterbury farmer Leonie
Guiney said the farmer concern was
evidence that shareholders were looking
beyond the short term and asking the
And she claims the Fonterra Share-
holders Council, the independent watch-
dog set up to safeguard the interests of
Fonterra's farmer-owners, is now power-
less and its purpose obsolete.
Guiney was a vocal opponent of the
Trading Among Farmers (Taf) capital
restructure which led one year ago to
units in Fonterra shares being listed on
the NZX and ASX. In the lead up to
farmer voting which ushered in Taf and
the unit listing, she constantly challenged
whether Fonterra would remain a 100
per cent farmer owned and controlled
cooperative if non-farmers could invest.
Farmers were assured by the Sir Henry
van der Heyden-led board that it would.
Guiney said she had recently put ques-
tions about the fund to the farmer-funded
She said the council responded:
make any comment,
or comment to any
one investor, without
it going through the
Guiney said the
response suggests to
her that purpose of the
council is now obso-
lete --- ''they are now
powerless to either
inform or represent
Council chairman Ian Brown did not
respond to a request for comment on
Earlier, he told the Waikato Times the
council did not have ''a formal view'' on
farmer concerns that Fonterra would use
the balance sheet to top up the dividend.
Brown said the board had discussed
the dividend policy with the council.
''I can understand the rationale...let's
just wait and see how it plays out.''
He said the dividend policy had been
raised at every recent farmer meeting he
had attended with Fonterra directors. But
he did not think farmers were complain-
ing about the policy. ''They just raised it
as an issue.''
Brown said the inherent tension
between farmers' expectation of the
highest possible milk price out of earnings
and market investors' expectation of the
highest possible dividend was ''always a
''It was going to happen sooner or later,
it just happened sooner.''
Last week South Canterbury farmer
David Ellis told Fairfax it was alarming
that directors would use farmers' balance
sheet to top up the dividend.
''The dividend should be a true
dividend.'' Ellis said the dividend could
artificially lift share prices, increasing
costs for farmers buying shares to lift milk
Another farmer, who declined to
be named, said the issue was causing
growing concern among dairy farmers.
''The board is raiding the balance sheet
to prop up the dividend. If you have a low
profit you should pay a low dividend.''
Fonterra is forecasting a record 2014
milk price to farmers of $8.30/kg milksol-
ids and a 32c dividend.
The Dairyman December 2013 33
Fonterra watchdog powerless to curb investors
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They are now powerless to either
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LEONIE GUINEY ON THE FONTERRA
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