Fonterra will adopt a more flexible shareholder structure to secure its future as milk volumes decrease.
Fonterra expects to implement its new capital structure by the end of March after legislative changes were passed in Parliament late Thursday.
The country’s largest dairy company will introduce a more flexible shareholder structure to make it easier for new farmers to join the cooperative and retain existing farmers by allowing more flexibility in the amount of investment required.
Fonterra’s agricultural suppliers voted in favor of the proposal last December, but the plan also required changes to the Dairy Industry Restructuring Act under which Fonterra was formed in 2001.
Fonterra leader Peter McBride said passage of the relevant legislation in Parliament late Thursday gave farmers the clarity they wanted.
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“This milestone gives us the confidence to move to our flexible shareholder structure,” he said in a statement to NZX on Friday.
The cooperative is selling assets overseas to focus on getting more value from New Zealand milk.
Fonterra is reshaping its business as a period of rapid expansion of the country’s dairy herd comes to an end as dairy farming faces tighter regulation to reduce its environmental impact.
McBride said the flexible ownership will help Fonterra maintain a sustainable milk supply, protect farmer ownership and control, and support a stable balance sheet.
Competitors Fonterra, who have opposed the changes, do not require farmers’ suppliers to buy shares, and the co-op has cited its high mandatory investments as one of the most influential reasons for farmers’ exit from the co-op. . Their share of the country’s milk herd has fallen from 96% in 2001 to 79%.
Fonterra has said that without the changes, it feared that with a potential milk supply fall of up to 20% by 2030, it would lose further market share, making it less efficient and costing farmers more money for their milk. Will not be able to pay the high price for or reinvest in the business.
Although Fonterra argued that the changes would increase competition and give farmers more choice, its competitors said the changes would strengthen the company’s market dominance.
The cooperative plans to confirm the final implementation date for the changes when it reports its first half results, which are currently set for March 16 next year.