The lynchpin of John Key's "rockstar economy" faces unprecedented losses

Fonterra's 'skeletons 

uncovered' as it predicts loss 

of $590-675m for year

Stuff,

12 August, 2019

Fonterra's financial skeletons are now being exposed, Canterbury dairy farmer Tom Mason says.

He said the dairy giant's announcement that it expects to make a reported loss of between $590 million and $675m this financial year, taking into account likely write-downs, was "a disaster".

The announcement comes in advance of the annual results due next month. Last year New Zealand's largest company made its only ever loss of $186m.

Fonterra chief executive Miles Hurrell said as a result, it would not pay a dividend for the 2019 financial year. This is a first for the co-op since 2002.

​Federated Farmers vice-president Andrew Hoggard asked "how the hell did we get here" so that it had now had to turn "the whole bus around".

Mason said the expected annual result was the legacy of the last 18 years where the ambitions of the organisation had not been matched by its ability and capital structure.

"There are plenty of grey hairs like me who remember the promise of 15 per cent a year growth and a $40 billion company. We had a merger that was sold on the basis of growth and they've not delivered at all. It's a disaster."

Mason said questions needed to be asked about what he believed to be a "cosy" relationship between Fonterra and auditor PWC. Board member Brent Goldsack is also a partner in PWC

"Maybe there wasn't so much scrutiny around that auditing process as there should have been," Mason said.

Mason said his four family farms were in a worse situation now than previously, when he had supplied 60 per cent of his milk to Synlait and 40 per cent to Fonterra.

Federated Farmers vice-president Andrew Hoggard asks where the talk of world domination by Fonterra has gone.

"Now we entirely supply Synlait but we've got 600,000 Fonterra shares, so we're 100 per cent exposed to the share value. But every other company sets a milk price that is referenced to Fonterra so we still need them to do what they've done really well, which is pick up milk and process it. They should have stuck to that rather than have grand ambitions that they didn't have the ability or capital structure to deliver on."

By midday Monday the share price had fallen from $3.73 to $3.60.

Hoggard said it was only two or three years ago that the Fonterra board and management had toured the country promoting the "V3 strategy" of driving more volume into higher value at velocity.

"I'm struggling to understand how Fonterra has got into the position of having to turn the whole bus around.

"It [the announcement] came as a bit of a surprise.This time of the year most of us are just head down bums up picking up calves, I haven't been thinking too much about Fonterra," Hoggard said.

Fonterra chief executive Miles Hurrell says the write downs do not affect the co-op's ability to operate.

The write downs are on its operations in Brazil, China, Australia and New Zealand, for a total of between $820m and 860m.