What does Fonterra do? Fonterra is a co-operative that buys milk from its farmer shareholders and processes it, mainly for export.
Fonterra and its shareholders produce more than two million tonnes of dairy ingredients, specialty ingredients and consumer products every year. Only about 5 per cent is kept in New Zealand. It produces about a third of the world’s dairy exports.
How does it make money?
Fonterra buys raw milk from farmers at a rate per kilogram of milk solids, and then on-sells it after it has been processed at one of its plants around the country.
Some of this is as bottled milk but it also boosts its profits by turning the milk into higher-value products that are sought-after internationally, such as infant formula.
It also has an increasing number of international operations.
Who owns it?
About 10,500 New Zealand farmers have shares in Fonterra.
How do they become a shareholder?
Farmers own shares in proportion to the volume of milk they produce every season. one share is held for every kilogram of milk solids supplied. If a farm is new, shareholding is based on estimated production. Farmers must have 1000 shares before milk will be collected from them.
What of its earnings go to farmers?
Much of Fonterra’s profits go to farmers. It pays out up to about 75 per cent of its net profit to shareholders in the form of dividends.
How do its fortunes affect milk prices?
The fact Fonterra is reporting a big profit does not mean much when it comes to buying your milk from the supermarket. The price of milk in shops is linked to global dairy prices, which are set by international trading.
It isn’t directly tied to the fortunes of any one company.
Source: Stuff
