The performance committee of the council regularly questions the board of directors and it will continue to monitor these areas on behalf of farmer-shareholders, committee chair John Stevenson wrote.
“The council and shareholders will be interested in receiving further information on the impact on owners’ capital of the decisions to invest in China Farms and Beingmate once the divestments are completed,” he said.
While constitutionally the council is not consulted on business decisions, it is required to monitor and report on Fonterra’s financial performance against specified targets set by the board and its strategy.
It also provides farmers with an objective, independent opinion, this year written by Northington Partners.
The 2020 milk price was up 12% to $7.14/kg milksolids, total collection was steady at 1517m kg and Fonterra’s market share of milk was down from 80.8% to 80%.
Normalised earnings before interest and tax were $879m, up 8%, earnings per share 24c and the return on capital was 6.7%.
Average total shareholder return (change in share price plus dividends) since 2001 has been 4.1% annually and the average return on capital employed has been 5.8%.
As part of the new strategy devised and published a year ago, Fonterra has targets for FY2022 and FY2024 respectively of 8.5% and 10% for ROC and 40c and 50c for EPS.
This financial year its statement of intent says it will maintain milk supply at 80%, make a ROC between 6% and 7%, have the EPS in the range 20c to 35c and bring the gearing ratio down to 36% to 40%.
These goals are not ambitious and improve only slightly on the FY2020 achievements.
The council has asked the board to include the movement in share price in its reports, perhaps compared with other market indices.
In the past month, the Fonterra Shareholders’ Fund units and the Fonterra Co-operative Group supply shares have increased in price 15%, from $3.98 to $4.62.
FCG supply shares on issue at July 31 were 1.612 billion, of which 9.78% were dry shares.
The FSF portion with a combination of wet and dry shares sold into the fund was 6.5%, well within the permitted size range of 7% to 12%.
Among the possible reasons for the recent rise in prices could be confidence returning that Fonterra will pay dividends in future or that a new capital structure now under discussion may buy back FSF units or make them in some way more valuable.
The 3% yield before tax potential of FSF units at $4.50 with a possible FY2021 dividend of 15c is considerably more than bank deposit interest.
