Co-op News September 2019: Agriculture

More documents

Recommendations

Info

NEW ZEALAND Fonterra dairy co-op predicts possible $675m loss – and no dividend New Zealand dairy co-op Fonterra says it will report a loss of up to NZ$675m (£354m) next month, citing adjustments for its South American businesses, drought in Australia and increased domestic competition. Chief executive Miles Hurrell said a full review of the business across the year, and work on the financial report for the year to 31 July, had made it clear that Fonterra needs to reduce the carrying value of several of its assets and take account of other one-off accounting adjustments, which total approximately $820-860m. He added: “While the Co-op’s FY19 underlying earnings range is within the current guidance of 10-15 cents per share, when you take into consideration these likely write-downs, we expect to make a reported loss of $590-675m this year, which is a 37 to 42 cent loss per share.” No dividend will be paid for the financial year, which chair John Monaghan said was “part of our stated intention to reduce the co-op’s debt, which is in everybody’s long-term interests”. Mr Hurrel said: “Since September 2018 we’ve been re-evaluating all investments, major assets and partnerships to ensure they still meet the co-operative’s needs. We are leaving no stone unturned in the work to turn our performance around. “We have taken a hard look at our endto-end business, including selling and reviewing the future of a number of assets that are no longer core to our strategy. The review process has also identified a small number of assets that we believe are overvalued, based on the outlook for their expected future returns.” He added that farmers and unit holders would be updated with new information as it became available, and that the numbers still need to be finalised and audited. Most of the oneoff accounting adjustments relate to non-cash impairment charges on four specific assets and the divestments that Fonterra has made this year as part of the portfolio review. “DPA Brazil, the New Zealand consumer business, China Farms and Australian Ingredients’ performance have been improving, but slower than expected and not at the level we had based our previous carrying values on,” said Mr Hurrell. “Our accounting valuation for DPA Brazil will be impaired by approximately $200m. This change is mainly due to the economic conditions in Brazil. While they are improving, consumer confidence and employment rates are not at the level required to support the sales volumes and price points our forecast cashflows were based on. “As a result of the previously announced sale of our Venezuelan consumer business, and the closing of our small Venezuelan Ingredients business, due to the country’s economic and political instability, we have made an accounting adjustment of approximately $135m relating primarily to the release of the adverse accumulated foreign currency translation reserve. “Our carrying value for China Farms will be impaired by approximately $200m due to the slower than expected operating performance. While the extent in which we participate is under strategic review, the fresh milk category in China continues to look promising and is growing. “In our New Zealand consumer business, the compounding effect of operational challenges, along with a slower than planned recovery in our market share has resulted in us reassessing its future earnings. We are now rebuilding this business and, as part of this, have sold Tip Top which allows the team to focus on its core business. The combined impact is a write-down of approximately $200m. “Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry. This includes closing our Dennington factory, which combined with writing off the goodwill in Australia Ingredients, results in a one-off impact of approximately $70m.” Mr Hurrell added that “these are tough but necessary decisions we need to make to reflect today’s realities”, and accepted that “farmers and unit holders will be rightly frustrated by these write-downs”. “I want to reassure them that they do not, in any way, impact our ability to continue to operate,” he said. “Our cashflow remains strong, our debt has reduced and the underlying performance of the business for FY19 is in-line with our latest earnings guidance of 10-15 cents per share. We remain on track with our other targets relating to reducing capital expenditure and operating expenses.” There has been some negative reaction from members. South Otago dairy farmer and Federated Farmers dairy chairman Mat Korteweg told the New Zealand Herald: “Last year we were told to expect a turnaround. For an average farmer with 200,000 shares, no expectation of a dividend is significant, as would have been money that was reinvested either into operations or reducing debt.” u Spotlight on agriculture, 28-39 20 | SEPTEMBER 2019
NEW ZEALAND New Zealand co-ops celebrated at sector’s annual awards Agri-tech co-operative the Livestock Improvement Corporation (LIC) has been named New Zealand’s Co-op Business of the Year. LIC also won a joint award with dairy co-op Fonterra, for their data-sharing platform Agrigate. The Cooperative Business NZ Annual Awards were presented in Wellington at an event hosted by national sector body Cooperative Business NZ. LIC picked up its gong for developing world-leading biosecurity protection from the drug-resistant bacteria Mycoplasma bovis, among many other achievements. Cooperative Business NZ CEO Craig Presland said the Waikatobased, 110-year-old agri-tech and herd improvement co-operative exemplified co-operative values and highlighted the strengths of the enduring business model. “LIC tells, arguably, the biggest success story among New Zealand’s co-operatives in the last 18 months,” he said. “It is a stand-out example of a modern, progressive co-op, which has to operate at the leading edge of its field in dairy genetics and agri-tech to keep its farmer shareholders ahead of the game. “Co-ops are member-owned as opposed to investor-owned, with Kiwi shareholders having skin in the game. The co-op business model is part of our nation’s DNA so it’s appropriate that LIC has won this year’s Co-operative Business of the Year.” Co-operative Leader of the Year went to Carl Taylor, co-founder of oneyear-old start-up Combined Building Supplies (CBS). Mr Taylor, a Christchurch-based builder, set up the building supplies co-op in April 2018 to offer a level playing field for smaller and medium-sized construction businesses, which do not have the buying power or bigger rivals. “To date, they have brought together more than 160 SME trade businesses so that their combined spending means bigger discounts for CBS Co-op’s members,” said Mr Presland, who called for a similar co-op game-changer to solve the country’s housing crisis. The Co-operation Amongst Co-ops Award, named after the sixth Rochdale Principle, was shared by LIC and Fonterra for Agrigate, a data-sharing and exchange platform for farmers. Mr Presland said Agrigate was first envisaged five years ago by the late John Wilson, former chair of Fonterra, and Murray King, chair of LIC. They recognised that farmers increasingly employ a number of digital tools, all working independently of one another rather than in unison. “The co-operation of LIC and Fonterra demonstrates their joint and genuine understanding of what it means to be a cooperative – working in collaboration as a way of meeting members’ needs,” added Mr Presland. The award for Outstanding Co-operative Contribution went to Rob Hewett, former chair of Silver Fern Farms (SFF) future chair of Farmlands. Craig Presland said Mr Hewett, who farms in South Otago’s Manuka Gorge, has led a range of initiatives including increasing SFF’s board diversity and working with China’s Shanghai Maling to restore SFF’s balance sheet, “while protecting the essence of the co-operative and the voice of its shareholders”. The Enduring Service Award went to SBS Bank, New Zealand’s oldest co-op, which celebrates its 150th anniversary this year. Established in 1869, the Southland bank is believed to be the first building society in the world to have achieved bank registration, in 2008, while retaining its mutual structure. Mr Presland said the member-owned bank ensures profits are re-distributed back to customers and therefore retained locally, or invested into local communities – “unlike our four major retail banks, all Australian-owned, whereby a portion of their profits is transferred offshore”. p Above: Carl Taylor (CSB Co-op), Emma Parsons (CEO of Agrigate), Murray King (LIC) and Rob Hewett (Silver Fern Farms) at the awards ceremony. Below: An LIC employee. Credit: LIC SEPTEMBER 2019 | 21
Page 1: SEPTEMBER 2019 AGRICULTURE Can co-o
Page 4 and 5: ICA Global Conference ... Why co-op
Page 6 and 7: NEWS CO-OPERATIVE ECONOMY REPORT Po
Page 8 and 9: CO-OP GROUP Digital transformation
Page 10 and 11: PLATFORM CO-OP BSL interpreters sig
Page 12 and 13: CREDIT UNIONS Lessons from abroad:
Page 14 and 15: GLOBAL UPDATES USA US agricultural
Page 16 and 17: GLOBAL Woccu conference: Credit uni
Page 18 and 19: GERMANY Regulation and funding gap
Page 22 and 23: MEET... Meet … Brandi Stankovic o
Page 24 and 25: YOUR VIEWS THERE SHOULD BE NO PLACE
Page 26 and 27: By Anca Voinea What’s on the agen
Page 28 and 29: Spotlight on farming Climate change
Page 30 and 31: “It’s not going to be easy. It
Page 32 and 33: a scheme to support farm coops in a
Page 34 and 35: Co-op agriculture: Driving change f
Page 36 and 37: Price wars, demutualisations, merge
Page 38 and 39: Cannabis and co-ops, from farming t
Page 40 and 41: Social entrepreneur and author Sam
Page 42 and 43: PRESSURE ON FAIRTRADE 25 By Rebecca
Page 44 and 45: SHAPING A NATION Civilising Rural I
Page 46 and 47: TIME FOR SOME CHANGES The Irish co-
Page 48: REVIEWS The co-op movement and its
Page 52: PRACTITIONERS FORUM 2019 Manchester

Co-op News September 2019: Agriculture

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?