New Zealand dairy giant Fonterra has held back from its global ambition to avoid further loss, a strategy confirmed on the company’s annual meeting on Thursday.
At the meeting, Fonterra management admitted that company had dropped its volume-based ambition early on.
“Eighteen months ago, we may have said we’re a global diary giant here to make a difference in the lives of 2 billion people, through a volume ambition of 30 billion liters of milk by 2025. Today, we stand for value,” Fonterra Chairman John Monaghan said at the meeting.
Fonterra’s former CEO Theo Spierings set a goal for the company to achieve a 35-percent increase in milk volume over five years. In order to achieve this goal, Fonterra would have needed to spend large amounts on sourcing milk from overseas farmers.
“With that driver gone, we are prioritizing New Zealand milk and only looking to our global milk sources when needed,” Monaghan said.
Fonterra posted a record loss of 387 million U.S. dollars this year. The shift away from volume to value had helped cut its costs dramatically. Fonterra had shed more than 1,400 people, frozen salaries for our people earning over 64,000 U.S. dollars and decided not to pay performance bonuses for the financial year. Total staff numbers now are 20,000, down from a high of 22,000 in 2015.
The financial priority of the company set at Thursday’s meeting is to lower its debt and capital expenditure.
Fonterra has a heavy investment in China farms. It is understood that the company has invested around 0.64 billion U.S. dollars over the past 10 years, including establishment costs and operational losses.