Fonterra proposes new capital structure to expand domestic market share

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imageStock Markets8 minutes ago (Sep 22, 2021 07:20PM ET)

(C) Reuters. FILE PHOTO: The Fonterra logo is seen near the Fonterra Te Rapa plant near Hamilton August 6, 2013. REUTERS/Nigel Marple/File Photo/File Photo

By Arundhati Dutta and Sameer Manekar

(Reuters) – New Zealand’s Fonterra Co-operative Group on Thursday proposed a capital structure that makes it easier for new farmers to enter the co-operative, taking forward its strategy to claw back it domestic market share.

Under the revised proposal, the co-operative’s minimum shareholding requirement will be set at 33% of milk supply, or one share per 3 kg of milk solids (kgMS), compared with the current compulsory requirement of one share per 1 kgMS.

The structure would also limit non-farmer investment in the listed Fonterra Shareholders Fund, a gateway for non-farmers to invest in the dairy giant, to “protect farmer ownership and control”.

“A capital structure with flexible shareholding would help to level the playing field with competitors, many of whom are foreign-backed and don’t require farmers to invest capital,” Chairman Peter McBride said.

The Auckland-based company in May had announced the overhaul of its capital structure to facilitate farmers’ entry into the cooperative as part of its push to streamline operations and strengthen its financial future.

Separately, Fonterra revealed its long-term strategy of continued focus on its domestic operations, starting with divesting its investment in Chile and considering taking its Australia operations public while retaining a significant interest.

“We see both these moves as critical to enabling greater focus on our New Zealand milk and, importantly, allowing us to free up capital, much of which is intended to be returned to shareholders,” Chief Executive Officer Miles Hurrell said.

As part of its strategy, the dairy giant expects to achieve a 40% to 50% jump in its operating profit by 2030, and intends to return NZ$1 billion ($699.80 million) through planned sales and dividends by fiscal year 2024.

($1 = 1.4273 New Zealand dollars)

Fonterra proposes new capital structure to expand domestic market share

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