Fonterra’s ongoing capital structure review has not produced any easy answers because every structure involves trade-offs, chair John Monaghan told the co-operative’s annual meeting.
“The objective of our review is to ensure our capital structure is fit for the future. We’re not trying to fix something that is broken,” he said.
The review group had identified the key elements of a financially sustainable co-operative and then looked for any potential problems to solve.
“To address these challenges, we are now looking at a whole range of alternative structures, as well as options within our current structure, and we are thoroughly testing them against the design principles,” he said.
Monaghan also spoke about Fonterra’s risk appetite statement, which he called a more conservative approach on the balance sheet, for investments and general business operations.
“It is a critical piece of work that gives us a much clearer view of the risk adjusted return, particularly for offshore investments, before we make our investment decisions,” he said.
In his farewell address on retirement from the chair and the board, Monaghan said Fonterra had delivered stable governance over the past two years of financial recovery and a new strategy.
There was a high level of uncertainty about 2021 and beyond about how global recession and new waves of covid will impact demand.
“The best way of coping with uncertainty is to stay on strategy and to focus on what is within our control,” he said.
“We were match fit when covid struck, with a new strategy, structure, and culture.
“That has us well positioned to come out the other side where there will be new opportunities.”
Fonterra’s continued success would be to generate sustainable returns along with more regeneration of the environment, and Monaghan firmly believed it could do both.
“As a farmers’ co-op, we pride ourselves on values such as loyalty, hard work, and being humble,” he said.
“Collectively, we have had to take the past few years of public criticism on the chin and just get on with the job.
“So, off the back of an improved culture and financial performance, it is great to see a fresh appreciation and respect for what we do.”