In recent correspondence, obtained by the New Zealand Herald, the council told farmers that some shareholders throughout the country were expressing their frustration by submitting milk supply cease notices to Fonterra.
Farmers who supply Fonterra have to buy shares in the cooperative, which also has units listed on the stock exchange. February is the time they advise Fonterra if they are supplying milk for another year.
The council had been going to meetings with farmers considering leaving the cooperative, and some discussions had been “very robust”, said the council.
Council chairman Duncan Coull would not be drawn on the correspondence to farmers.
“We send out letters all the time,” Coull said.
Pressed, he said there was always discussion about cease notices between farmer-shareholders and the council at supply sign-up time when it was tradition for farmers to be urged to reflect on the benefits of cooperative membership.
Fonterra is the biggest dairy manufacturer and exporter in the country, collecting 82 percent of raw milk, but its much smaller rivals, which don’t require farmers to buy shares to supply milk, have been steadily gaining market traction and luring Fonterra farmers.
The correspondence from the council said Beingmate’s forecast earnings downgrade was concerning for all shareholders given their significant investment in the business.
Councillors had had an update and a presentation from the Fonterra board since the downgrade news.
Councillors’ message to the board had been that the board had “the responsibility to provide clear communications to shareholders and it should not be left to the media to fill the vacuum”.
“At those meetings (Fonterra chairman) John Wilson acknowledged council’s and your frustrations at the lack of information from the board on Beingmate,” the council wrote.
No new information had been received from the board at those meetings.
Councillors were told shareholders would be updated on the Beingmate situation when further information was available and when Fonterra announced its half-year results on March 21.
Fonterra bought an 18.8 percent stake in the Beingmate Baby & Child company in 2015.
The Chinese company’s financial performance had started sliding before the investment, according to financial and news reports.
In September last year, Beingmate’s continuing poor performance saw the investment value cut to $615m on Fonterra’s books. This compared to the market value of just under $400m, said analysts.
In January, Beingmate said its expected loss for the latest financial year would be far bigger than forecast. Fonterra’s first investment in China was the disastrous foray into Sanlu in 2005. This company was deeply involved in a melamine contamination which led to child deaths and sickness. The company failed and Fonterra farmers lost their $200m-plus investment.
Fonterra has also since invested $800m in establishing dairy farms in China which have recorded steady losses. Last financial year the farms yielded $1m in earnings before interest and tax, despite a $38m subsidy of their operations by Fonterra’s China ingredients division.
Fonterra’s current unit price on the NZX is $5.95. The units were listed in 2012 at $5.50 and went straight to $6.66. They reached a high of $8.09 in May 2013.
Source: NZ Herald