Monday 28th January 2013
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Fonterra chief executive Theo Spierings has torn strips off Labour agriculture spokesman Damien O'Connor for, he says, endangering the whole of the New Zealand dairy industry with "drastic" allegations relating to traces of a benign chemical, DCD, found in some powdered milk.
O'Connor issued a press statement alleging a cover-up of the DCD findings in September to allow the Fonterra Shareholder Fund float to occur unimpeded in November.
"If you do those allegations, you better come with some evidence," Spierings told BusinessDesk. "What you are doing here is not just a Fonterra issue, it is a New Zealand issue. You are attacking your key sector of the country.
"I'm sorry. I get a little bit emotional about it. I don't like this kind of attitude," said the recently appointed Dutch ceo, who said O'Connor risked undoing three days' intensive work, including Prime Minister John Key, with international investors and media. The issue got out of control internationally when a Wall Street Journal article questioned the safety of New Zealand milk.
Spierings is deeply offended by O'Connor's attack, and scathing of WSJ's use of a local journalist he claims was "filling in for someone" to kick the issue into international prominence.
He defends Fonterra's process once it found DCD, a nitrate inhibitor used to curb greenhouse gas emissions from farming, in tiny quantities in milk powder last spring, saying the first thing considered was whether it got "a green tick on food safety."
It did. DCD levels were 100 times lower than standards in the European Union. In other parts of the world, no standards exist.
With a "dark green" tick on food safety, the company had "a little bit of time" for collective action with fertiliser companies, telling them they must either manage the DCD issue with farmers or have Fonterra tell farmers to stop using it in the meantime, while international standards were sorted out.
The manufacturers, Ballance Agri-Nutrients and Ravensdown, withdrew fertilisers containing DCD voluntarily, a fact not notified publicly until late last week.
"We are coming with answers and telling the truth," said Spierings.
FSF units took a small hit early in trading, falling as much as 9 cents to $7.14, as international investors digested the information Fonterra sent on the issue.
The biggest risk for Fonterra would be if one country were to decide to impose even a brief, precautionary ban on milkpowder imports, which constitute a large proportion of Fonterra's $14.5 billion annual export revenues, said Andrew Bascand, managing director at Harbour Asset Management in Wellington.
"To date, there's been no market there's been that sort of reaction. Fonterra appear to be on the front foot handling it. The commentary from our Chinese agents says they feel comfortable with where are at."
Bascand said any weakness in the FSF price caused by the issue would be seen by some investors as a buying opportunity. The units were sold at IPO last November for $5.50. They listed at $6.60, and have risen above $7 since.
Spierings rubbished O'Connor's claim the DCD issue was hushed up ahead of the listing, the largest equity event in New Zealand stock exchange's history for at least a generation.
"If there had been a public health or safety issue, we would have disclosed," Spierings said.
The range of elements being tested in milk was constantly expanding as testing was becoming more sophisticated. Where there was no public health risk, Spierings argues against mandatory immediate disclosure because of the volume of disclosures that would create.
"We should not need to disclose in our whole business things we want to improve," said Spierings. "It would get (to be) a zoo. We could not run the company."
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