Wednesday 15th August 2018
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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."
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