As dairy giant Fonterra forecasts another big loss, farmers say it will hit them hard.
Photo: RNZ/ Andrew McRae
Matthew Zonderop farms near Te Poi in Waikato, and believes Fonterra needs to get back to basics.
“And the rest will follow. We have our fingers in too many pies. They have made bad investments.”
The co-operative is forecasting a loss of between $590 million and $675m for the current financial year.
Fonterra said it expected to write down the value of four significant overseas ventures in South America, China and Australia by more than $600m.
The writedowns come as it reviews its business from top to bottom and looks to cut its debt by $800m this year.
It has decided not to pay a dividend for the financial year based on the losses, in an effort to pay down more of the co-operative’s debt.
Mr Zonderop said it is now up to farmers to not be so apathetic with the Shareholders Council and with their voting rights.
“They have to turn up at meetings and start asking these hard questions.”
He said the loss of any dividend this year will be extremely hard for a lot of farmers and will hinder growth and paying down debt.
“A lot of guys are still struggling with debt particularly young farm owners who have gone out and purchased their first farm and they were buying shares when they were at six-bucks and now all of a sudden their capital investment has halved.
“The interest rate is higher than the value of the share and it is almost walk away material.”
Ohinewai dairy farmer Roger Lumsden wonders just how it got so bad.
“There are a lot of guys out there scratching their heads right now.”
Mr Lumsden said the news from Fonterra will knock the confidence out of farmers.
“Our on-farm expenses are certainly creeping up and we are trying to cover them with our milk price so it is a direction where everything is going I guess.
“People will be thinking, you know we have a lot of money tied up in shares and if we are going to lose the value on those shares, where do we go to from here.”
Mr Lumsden is concerned that with Fonterra cutting ties with a number of overseas investments, it may lose some of its influence in those markets.
“If we start to lose that it will be come fairly concerning.”
Mr Lumsden said Fonterra certainly had to do something.
“It had a bit of tidying up to do, they went through a period where they were very quick to spend money on capital overseas and some of that was shown to be a poor investment.”
He is sceptical that the company is now on the right track.
“I think that they have got themselves into a slightly deeper hole than perhaps what they are letting on.”
“The next 12 or 18-months will be very interesting for the long-term view of Fonterra,” he said.