Coming up to five years in the job, he claimed to have delivered the financial results, structural needs and social responsibilities implicit in his co-operative strategy and business transformation.
Fonterra’s 21,000 employees had responded creditably to the pressures and challenges put on them.
“Farmers have been under a lot of stress in an unstable world and they have responded with different systems and greater efficiencies.
“Fonterra’s own business transformation has brought back good results,” he said when highlighting the $834 million net profit after tax (Npat) from the 2016 financial year.
“The whole organisation has delivered in a very difficult market of low international dairy prices and geopolitical disruption.”
It now had to show that profitability and operational efficiency could be maintained and improved as global dairy prices rose again.
Spierings said Fonterra was now in pole position in the race against its competitors.
He showed a limited comparison of Fonterra against Friesland Campina in the Netherlands, his former employer, and Arla Foods of Denmark.
Fonterra had achieved a 12.4% return on capital in 2015-16 versus 9.9% and 7.5% respectively, based on the end-2015 accounts of both European co-operatives.
Among other longer-term ambitions he labelled “achieved” were the gross margin of 21% and the gearing ratio of 44.3%.
The transformation results included debt reduction of $1.6 billion, working capital down 10 days to 77 days and closing inventory, at balance date, down 21%.
Total cash freed up was $2.2b, which was used for debt reduction and to support dairy farmers through earlier milk payments and dividends, and the loan scheme.
Spierings also hailed the volume increases in food service, up 15%, and consumer goods, up 5% or twice the rate of growth in dairy products internationally, and in dairy ingredients, up 19%.
“The whole organisation has delivered in a very difficult market of low international dairy prices and geopolitical disruption.”
Theo Spierings
Fonterra
Fully three quarters of Fonterra’s total 23.7b litres milk equivalent (LME) of total external sales volume were in added-value categories, he said.
Also included in his wheel of volume achievements were Dairy Industry Restructuring Act milk supplied to competitors down 31% and GlobalDairyTrade auction milk down 24%.
Those two no-added-value categories now accounted for only 22% of total volume.
Turning to the financial results, Spierings said ingredients delivered $1.2b earnings before interest and tax (Ebit) and consumer and food service $580m Ebit.
One billion litres more milk had moved from ingredients to consumer and food service in the past two years, he said.
Sales in China of consumer and food service products had increased by 48%, including UHT and greater distribution of Anmum infant formula.
Fonterra had earned trust by doing what it said it would do and investing in its communities and in the future.
“We did not cut back on Milk for Schools or Living Water or our social investments elsewhere.
“More volumes of milk sold at higher value is at the heart of our strategy.
“For farmers, the promise is that we will make the most of their milk and we are keeping that promise.”
Better optimisation was critical during the period of low global prices, towards products with higher gross margins like cheese and casein and that had delivered $300m more.
It would be difficult for Fonterra to maintain or improve on the $1.2b Ebit from ingredients this financial year now that international dairy prices and farmgate milk prices in NZ were rising but that was the new challenge before it, he said.
Adding value through consumer goods and food service was only halfway towards the 10b LME goal for 2025.
The dividend of 40c/share and investment unit was up 60% on the previous year and had delivered a yield on the volume-weighted average closing price ($5.50) across the year
