Dairy farmers are disappointed after Fonterra unveiled a record annual loss and signalled a back to basics strategy in a bid to return to profitability.
Fonterra chief executive Miles Hurrell makes statements at the release of the co-operative's annual results. Photo: RNZ / Dan Cook
The dairy giant today posted a net loss of $605 million for the year to July, after writing down assets to the tune of $826m.
Fonterra's boss says that's prompted a fundamental rethink of its business - one that the company's farmer suppliers hope will pay dividends.
T H Enterprises managing director Trevor Hamilton oversees the farming of 8000 cows across Canterbury, the Central Plateau and the Hawkes Bay.
Mr Hamilton said Fonterra's financial result was extremely disturbing as was its tumbling share price.
"When farmers do their statutory accounts and find that even if they have been able to pay back debt probably their balance sheet's gone nowhere because of the losses on the Fonterra shares.
"So there's been huge losses on Fonterra shares. You're talking about losses of you know of $500,000 on the average sized farm on the balance sheet."
Mr Hamilton, whose company supplied about a third of its milk to Fonterra, said the performance of the dairy cooperative's board, had left a lot to be desired.
"A lot of this stuff which is rolling out now is about poor governance and governance not holding management to account in previous times so it's all rolling out now.
"I think the current board is trying to do something about it, but you know she's a big ship pulling an even bigger anchor."
Grant Boyd farmed a mere 185 cows at Stratford in Taranaki but shared a smilier view.
"Yeah I feel quite critical of the board but also of the shareholders' council. I used to be a shareholder councillor, probably 10 years ago, and their role is to be a watchdog for the shareholders.
"But look, it is what it is now and it is about moving forward and I do have confidence in Miles (Hurrell, Fonterra chief executive) and the strategy the board is bringing out."
Paeroa farmer Conall Buchanan preferred to focus on the forecast Farmgate Milk Price of $6.35 per kilo of milk solids, even if no dividend would be paid.
"Well look any payout with a six in front of it is good so $6.35 is nice to have and it's certainly positive that we are looking at a payout that is potentially higher than that next year.
"And I think we need to remember that the payout is the number that really matters to farmers. The dividend is good to have but it is the payout that pays the bills."
Not that Mr Buchanan had overlooked the $605m loss.
"No one can be happy losing that sort of money, but I guess you've got to look for some positives and the fact that there is a $230m underlying profit is good."
"We are certainly paying for some decisions that were made and things haven't gone as well as they should have long term."
Hadleigh Germann farms about 550 cows in Southland and said, although the overall result was poor, there were positive signals in the announcement too.
"Perhaps what hasn't been reported a lot in the media is there is still an operating profit, of I think of $275m approximately, which they have admitted is small but it underlines that the underlying business is performing okay."
Mr Germann was also satisfied with the farmgate milk price.
Meanwhile, Cathy Brown - who farmed about 250 cows south east of Rotorua - liked the look of the new board.
"Really and truly it's great to see that the board or the organisation has taken this time to reflect and think about the agricultural industry globally and see what they need to move us forward.
"I think I'd be more concerned if were putting their head in the sand and not moving forward. We need to move forward."