Sharechat Logo

Fonterra CEO Spierings goes early after milk price trimmed, dividend cut

Wednesday 15th August 2018

Text too small?

Fonterra Cooperative Group chief executive Theo Spierings is leaving the role early after the world's biggest dairy exporter lowered its farmgate payout and trimmed its dividend to retain cash. 

Chief operating officer of Farm Source, Miles Hurrell, will take over as interim CEO immediately, with Spierings staying until the end of the month "to ensure a smooth transition".

Spierings had already signalled plans to leave the Auckland-based company this year. His abrupt departure followed last week's board meeting where new chair John Monaghan announced a lower milk price for the 2017/18 season and said Fonterra probably wouldn't pay a final dividend in an effort to bolster a balance sheet hit by the Danone settlement, a large impairment on its Beingmate investment in China, and skinnier margins across the business. 

Fonterra's board has stopped its global search for Spierings' replacement to reassess what they're looking for in a new CEO. 

"The cooperative’s board is clear that it is not best practice to have the chairman and CEO stand down at the same time, but events have overtaken that decision," Monaghan said in a statement. “It’s important that we give ourselves the time to take stock of where we are as a cooperative, breathe some fresh air into the business, then determine any changes that are needed."

Monaghan took over as chair of the country's dominant milk processor after John Wilson stepped down over ill-health. The board and executive team were already being criticised over the poor performance of Fonterra's Beingmate investment and lacklustre earnings growth. 

The dairy cooperative is in for a period of change with two of three farmer-elected spots on the board up for grabs at this year's annual meeting. The government is also undertaking a review of the wider dairy industry's legislative settings. 

The company will also report its annual result next month after Spierings has officially left. It has indicated earnings will be at the bottom end or slightly below guidance of 25-30 cents per share, implying earnings of $403 million to $484 million.

Last week's moves found little favour in any quarters with units of the Fonterra Shareholders' Fund sinking to a three-year low of $4.80 as outside investors questioned the cooperative's ability to operate under its existing capital structure. The Shareholders' Council also took the unusual step of questioning the company's ability to create value, saying its farmer shareholders found themselves in an "unacceptable" situation. 

Hurrell currently oversees the unit responsible for working directly with the farmer shareholders and heads the global farming strategy. 

"Miles is well-respected both within our cooperative and by our key global customers and wider stakeholders," Monaghan said. "Our CEO role requires intellect, energy and commitment. Miles brings that in spades.". 

Hurrell said Fonterra hasn't "always got everything right" and will learn from those mistakes as "we face up to challenges that are in front of us."

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Updated: NZ central bank cuts rates, signals more to come
Ardern, Macron to chair meeting to stop social media's use in terrorism
NZ commodity prices lift in March, led by dairy
Barfoot sees regained momentum in Auckland sales amid flat prices
House prices rose in February but sales volumes fell 9.5%
NZ commodity prices continue to lift in February
Rising house prices put pressure on affordability through tail-end of 2018
Standard & Poor's lifts NZ's outlook to positive
Fuel imports drive NZ's annual trade deficit to 11-year high
RBNZ plucks bank capital numbers out of the air: Reddell

IRG See IRG research reports