Fonterra has signaled the possibility of a major shake-up throughout its operations entailing job losses from senior management down.
It today confirmed it had launched an in-depth review of its business, when questioned by the New Zealand Farmers Weekly.
It had not planned to reveal the move till its annual meeting in November.
Chief operating officer of Velocity, Jacqueline Chow, said in a statement the review was being done by local and international consultants.
It was confirmed high profile United States-based consultant firm McKinsey was involved.
“Everything is in scope and we’re taking nothing off the table.
“Velocity is a reset of our business focusing on performance, creating value faster and generating more cash for our farmers.
“We will do this by stepping up our game and the way we work, improving efficiency, lowering cost and duplication where we can and improving effectiveness and agility,” Chow said.
The co-operative declined to provide specific details of the review but it was understood it would also look at Fonterra’s culture.
The NZ Farmers Weekly has learnt staff believe job losses at all levels of the business are inevitable.
Chow said shareholders would be updated on progress at November’s annual meeting.
The review was part of Fonterra’s V3 project which sought the best opportunities for growth in the coming decade by looking at volume, value and the pace of implementing the strategy.
Farmers have begun to openly question Fonterra’s performance, in part because of the falling milk price but, as revealed in a recent investigation in The NZ Farmers Weekly, also because of frustration with poor communication and a change in culture.
While the review was said to be looking at all staff farmers had also begun questioning the board’s performance and in tomorrow’s Farmers Weekly farmer Malcolm Lumsden suggests heads must roll there too.
Shareholder-suppliers have said Fonterra’s culture was more like a corporate than a co-operative.
Financially, Fonterra’s half year result to January 31 was less than convincing despite sales of 2.2 million tonnes being 10% higher than a year earlier.
Revenue was 14% lower than the corresponding period in 2014 at $9.746 billion, net profit after tax was 16% lower at $83m and normalised earnings before interest and tax were $376m compared to $403m.
Plummeting international dairy prices and soaring global production saw Fonterra confirm this week a final payout for the 2014-15 season of $4.40 a kilogram of milksolids plus a dividend of 20 to 30c a share.
It also announced an opening farmgate payout for the coming season of $5.25 but chairman John Wilson said it came with a caution that it was the co-operative’s best view of global dairy markets in the coming year.
