By Paul McBeth
Fonterra Cooperative Group, the world's biggest dairy exporter, has expanded its top management team as part of the new strategy to focus on sales in emerging markets.
New chief executive Theo Spierings has appointed 11 of the 12 roles as part of a new group strategy, all with internal candidates.
The flatter management structure will have a greater regional focus and come into effect from Aug. 1, the start of a new financial year. Fonterra management has previously operated under large silos headed up by handful of executives, and the dairy exporter wants to reduce the complexity and potential for duplication under the existing model.
"The new structure and senior appointments reflect our focus on dairy nutrition and emerging markets, as well as our intention to reduce layers and duplication to drive efficiencies across the business," Spierings said in a statement.
"These changes, along with reconfiguration of existing business units and the support functions within the company, will position us to increase volumes and value with our strategy."
Spierings announced the so-called group strategy refresh at the first-half result in March, which included more than 100 projects.
At the time, he singled out several strategies, such as a strong push into rapidly growing emerging markets where Fonterra has a strong presence such as China, Association of South Eastern Nations and Latin America, optimising New Zealand milk supply, building integrated milk pools, growing volumes of consumer branded and out-of-home nutrition products and tapping advanced nutrition needs of babies and ageing populations.
The top management, who all report to Spierings, is made up of:
- chief financial officer Jonathan Mason,
- managing director group optimisation and supply chain Ian Palliser,
- group general manager strategy Maury Leyland,
- group GM mergers and acquisitions Paul Campbell,
- MD cooperative affairs Todd Muller,
- MD New Zealand milk Gary Romano,
- MD Australia New Zealand John Doumani,
- MD ASEAN/Middle East/North Africa Mark Wilson,
- MD China/India Kelvin Wickham,
- MD Latin America Alex Turnbull, and
- MD Fonterra nutrition Sarah Kennedy.
The position for MD people culture and services is still to be confirmed.
The new managers have until Aug. 1 to appoint the next two layers of management as the dairy exporter prepares for its new structure.
The new-look management structure comes as Fonterra looks to shore up its capital base in a bid to fund its global aspirations with the Trading Among Farmers project – a scheme that would enable farmers to sell the dividend rights of their shares into a fund, which would then be available for investors to purchase as units in a secondary market.
The dairy exporter has already unveiled plans to invest in a new Indonesian plant as part of its growth plans in Asia, and flagged a $100 million spend-up on building two new farms in China as it looks to produce 1 billion litres of milk in the world’s most populous nation by 2020.
(BusinessDesk)
9 Comments
plus ça change, plus c'est la même chose
http://en.wiktionary.org/wiki/the_more_things_change,_the_more_they_sta…
A proverb making the observation that turbulent changes do not affect reality on a deeper level other than to cement the status quo
I see the new structure has gone back to having a manager of strategy. They had one of those back in 2006 as a member of an executive of about the same size as that announced today.
The then incumbent strategy manager was the one who had to explain to Treasury that Fonterra did not face any redemption risk.
For background, esp the Deutsche Bank presentation.
http://www.fonterra.com/wps/wcm/connect/fonterracom/fonterra.com/Our+Bu…
Interim Results & Strategy Refresh Presentation, 29 March 2012
Deutsche Bank Conference Presentation by CEO Theo Spierings, 6 March 2012
and
Fonterra unveiled a strategy update yesterday, with Mr Spierings noting ''return on capital has been kind of flat since 2009''.
Fonterra has embarked on a capital restructure to facilitate trading among its 10,500 farmer-shareholders in New Zealand, and could also establish a share-backed securities fund for outside investors, which could be a unit trust quoted on the New Zealand stock exchange.
Read more: http://www.smh.com.au/business/dairy-producer-fonterra-sour-over-supermarket-wars-20120329-1w14p.html#ixzz1uJjqeMtJ They know return on equity is not right (as over the past years suppliers have provided more and more equity), but gloss over in presentations.
The TAF will not improve the existing (low) returns of assets (esp the "assets above the commodity processing plants) - but give outside investors the mandate to "come and do something".
Thanks Henry.
Fonterra's returns on equity and total assets are important to know and understand.
As Fonterra processes each increased Kg/MS, it gets $4.52.
Think of the massive lift in production we have had in farm production.....
No wonder that Fonterra's gearing ratio has been going down. - something that Fonterra is happy to point to and let ppl think - conserative deleveraging etc, etc. but only when a reporter asks about return on capital do we get an comment - not in the corp. presentations... - see SMH above..
Does it matter .... Now: look at synlait, when Bright bought in and took over the company and its factories they did so with an IRR return of 18%.
This was posted for Omno...
http://www.interest.co.nz/rural-news/59075/businessdesk-fonterra-wont-s…
Why WACC matters:
http://www.sinoendless.com/en/component/content/article/6349?task=view
This appears to be a Board note showing the approval of the Bright investment into Synlait at an IRR of 18%. IRR is the internal rate of return - the return on invested equity.
No wonder every last production cost (supplier pmts, DIRA pmts) is under the hammer.
Looks like the forecast NZ currency numbers may have had comma/decimal points dropped ..
..........
3) The share subscription price
By mutual agreement, the proposed 3.15 per share, New Zealand, subscription 26,021,658 shares, for a total of about 8,200 million New Zealand dollars (about 382 million yuan).
4) The investment rate of return
According to financial projections, the project's internal rate of return (IRR) of 18.0%.
Third, foreign investment risk analysis
1, the risk of fluctuations in the international milk powder prices
Target company's products are sold to global commodity markets milk, global milk price fluctuations brought to the financial performance of the impact of uncontrollable.....
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Full Copy:
JFGT (20120501-08:32:19 to UTF-8) ART 6349 zh => en
Bright Dairy & Food Co., Ltd. announced foreign investment
All members of the Company and the Board to ensure that notice does not contain any false, misleading statements or material omissions, and its contents are true, accurate and complete jointly and severally accept responsibility.
Important tips:
From the parliamentary goings on, synlait think Fonterra is paying farm gate price 50 cents too much whatever the price.
ii. the farmgate milk price is now approximately 40 - 50 cents per kgMS higher than either Fonterra’s own commodities business1, or a typical independent processor (operating efficiently), can afford to pay for milk and still earn an appropriate return on capital;
http://www.parliament.nz/NR/rdonlyres/336AD36E-5D9A-4685-8052-26174B23C…
18% on $4.52 is 81 cents.
It would be nice to see what are the things being done now to:
- grab back the earnings taken by the Oz supermarkets
- drive up the milk price - (or is $5.5 to $6.0 - or some other number??? - farm gate steady state all we should expect).
- get return from co-op assets, that will see dividends increase at x%.
Thinks for your thoughts and heads up on links Henry_Tull, with milking cows and looking after kids while my wife is away, and trying to read between the lines of the officially sanctified PR, it's hard to make sense of what's happening, particularly around TAF and DIRA which are inextricably linked.
Having said that, I don't see that as a reason to introduce external capital and shareholders. A recent article by a supplier justified adopting TAF to grow share in market volume to ensure maintenance of trading relations with key industry players (Nestle et al.). They went on to point out the fate of grain giant Viterra at hands of Glencore group, but didn't mention the fate of the Australian Barley Board first being swallowed up by Viterra, after it had shed its cooperative shackles. The evidence is compelling, external investment will be the end of the cooperative and quite likely Fonterra as far as NZ is concerned.
I'm keen to see a return on cooperative assets, not to pump a dividend, but to underpin a strong stable balance sheet, which would allow organic growth to secure market share, where necessary and if possible.
Nice to see that you are taking the time to show some interest Christov. As a supplying shareholder who relies on the cooperative structure for a livlihood, I'm concerned we may lose it. Henry V wants it kept in the family, but I think if the corporate investors get a hold of the co-op, it's bad for NZ anyway. So cheers
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