Negative achievements against targets were recorded for the total amount available for payout, earnings per share, consumer and food service volume, the gearing ratio, working capital days, return on capital, milk volume collected and employee injuries.
In the council’s report the chairman Duncan Coull said the financial results fall well short of everyone’s expectations.
While there were one-off impacts from Beingmate and Danone many parts of the underlying business failed to meet targets.
“This is not good enough and fundamental change is required in thinking and practice to reverse the performance of the business.”
The shift of 5c from the milk price to earnings to protect the balance, while necessary and transparent, was a means of raising capital after the failure to protect farmers’ existing capital.
But farmers collectively lost $1.5 billion from their balance sheets when the Fonterra share price fell from $6.08 to $5.12 over the course of the financial year.
“All of us need to take stock, reflect and have the courage to challenge ourselves that change is required to deliver a different result.”
Coull said his conversations with shareholders had a common theme – stronger and more consistent performance on their capital invested.
There is a danger of spending too much time and energy on negatives, which is counter-productive, and now is a time to regroup, unite and deliver on the promise to be the national champion.
The report said Fonterra collected 81.8% of NZ milksolids, down from 82.4% the previous year.
The revenue of 92c a litre is a long way short of the $1.20 aspiration.
The gearing ratio blew out 4% to 48.4% and even without the effect of the Beingmate impairment it would have finished outside the target range of 40-45%.
Leverage, which is the amount of debt used to buy assets, finished the year at 4.5 times EBITDA.
The council said that must be reduced to under four times if the credit rating is not to be downgraded and interest costs subsequently rise.
Net debt rose by $600 million and total equity fell by $500m compared with the previous year.
The council also challenged the board over the lack of transparency concerning the true Beingmate position.
The blame was repeatedly put on market factors and regulatory change when there were other significant issues known to the management and the board.
The protocol called for substantive and frank engagement between the board and the council.
There has been a recommitment to that principle, with improved processes on investment due diligence and monitoring, the report said.
