Units in the Fonterra Shareholders’ Fund on the NZX and ASX are in a trading halt as the company considers a capital restructure.
The dairy co-operative said it was preparing to make an announcement prior to the markets’ opening on Thursday in relation to seeking shareholder feedback on “potential options to change its capital structure”.
However, the trading halt would remain until Friday to give shareholders and unitholders time to consider the materials.
Fonterra remained “in a strong financial position and the consultation process will not affect the co-operative’s ability to operate,” the company said.
Dairy commentators were reluctant to speculate ahead of the announcement but said they were expecting something big, given the timespan of the trading halt.
“That would suggest that there’s a bit of meat in whatever they’re going to release which they feel needs to be carefully digested,” said perennial commentator Keith Woodcock.
“It’s the length of the trading halt and the fact that the trading halt is going to continue for at least 24 hours after the announcement is made that tells us this is likely to be something pretty significant.”
Milk prices have been strong for some time, helping the company achieve a healthy annual net profit last year of $659 million, a $1.3 billion improvement on the previous year.
In March, Fonterra raised its forecast milk price for this season to between $7.30 and $7.90 per kilogram of milk solids, with a mid-point of $7.60 per kgMS. That’s up from $7.14 per kgMS last season.
Then in April Fonterra appeared to ramp up its efforts to reduce debt, selling its dairy farms in China for $552 million, as it pulled back from global expansion.
Chief executive Miles Hurrell said last year that as profitability increased and after reducing its debt by more than $1b, it was back in a position to start paying dividends again.
Under his leadership, the cooperative – which is owned by its 10,000 farmer shareholders – has refocused on its core New Zealand milk business, selling overseas assets and underperforming plants, and reducing costs and debt to improve earnings.