It listed three key findings.
The first was that Fonterra has failed to deliver meaningful returns over and above the cost of capital since inception.
“Milk growth over the past 15 years has been an impediment but is now largely historical.
“It is critical that this be addressed to ensure continued supply of milk and capital.”
The second was that milk price has and continues to be the greatest driver of on-farm profitability.
The Milk Price Manual continues to drive transparency and efficiency, placing increasing tension on the business to deliver value over and above this.
“This is the most appropriate tension for farmers as suppliers of milk and providers of capital.
“All dairy farmers in New Zealand benefit from this irrespective of whom they supply,” said.
The third finding was that given the relationship between milk price and earnings it’s important shareholders look at the total available for payout as a true measure of performance over time.
“Notwithstanding the findings of this report, council remains firmly of the view that the co-operative structure is the only structure that will provide for the enduring needs of our intergenerational farming families,” Coull said.
The assessment, done for the council by Northington Partners, clearly shows Fonterra’s financial performance since inception has been unsatisfactory.
“When considered as a stand-alone investment, the average returns generated by Fonterra since inception are lower than relevant benchmarks.
“The results are unambiguous.”
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Read the report.