It is confident it can address its debt issue and strengthen its balance sheet without those measures.
The reset is on track to meet its target of $800m this year while reduced spending will boost its profitability.
“We’re both tightening our belts and looking for savings but also looking at our investment portfolio,” Rivers said.
He is unequivocal in rejecting commentators’ suggestions it retain money from the milk payout and change the setting mechanism.
“Categorially no. We are in very different circumstances to Westland.”
Rivers describes the milk price-setting process as sound. It is independently monitored by the Commerce Commission and must be sacrosanct.
He accepts Fonterra is over-extended with debt and therefore its performance needs to improve but the level of debt is not a consequence of it being a co-operative.
There is confidence balance sheet strength can be restored with the current ownership structure. Being a co-operative offers much that is positive through connections with the owners and suppliers.
“Absolutely, the co-operative model is a strength and not a weakness.”
Rivers says lessons have been learnt.
“We have to treat our capital a lot more preciously and that is definitely the mindset going forward.”
How the $800m in proceeds from asset sales will be spent is up to the board but Rivers says some will be needed to retire debt and some could be reinvested.
There has, in recent months, been a shift in the co-op’s mindset to no longer aspire to dominate the world trade in dairy products.
Rather, it is targeting dairy product categories it believes it can compete in and, importantly, where it thinks it can win.
Once the strategy is reviewed and agreed to the next focus will be Fonterra’s structure.
“The first step is the strategy, what strategy do we need based on the business and operations and then what structure do we need to be successful?”
Fonterra has access to sufficient capital and assets and a strong, well executed strategy will provide access to any extra capital needed.
“It comes back to performance.”
Operational expenses have been reduced to 2017 levels and capital expenditure cut from $861m last year to $650m, helped in part by no short- term requirement for new processing capacity.
Fonterra believes a value-added strategy is still relevant, even with the associated cost and commitment.
While Tip Top is a value-adding company it was Fonterra’s only ice cream business and it used more sugar than milk. Tip Top will remain a Fonterra customer.
Fonterra Shareholder’s Fund shares have fallen from $4.78 on January 9 to $3.75 on July 9, having started 2018 at $6.40.
Rivers said that is a concern for shareholders, putting pressure on their balance sheets but does not directly affect Fonterra’s ability to pay its bills.
“We think we have got a turnaround plan and strategy and that value will be reflected in the share price.”
