The release of Fonterra’s annual report on 24 September coincided for me with a long plane trip back from China. I used the time trying to work out what all the numbers really mean. It was not an easy task.
Fonterra’s annual report – like most reports from large companies –provides masses of numbers. Some are clearly there for public relations purposes. Others are there to meet the required rules of the International Financial Reporting Standards (IFRS). And then there is another set of numbers which Fonterra constructs according to its own rules.
These additional measures are called non-GAAP measures; i.e. ‘non-generally accepted accounting measures’. Fonterra itself acknowledges that these measures are not standard between companies, so comparison must be made with caution. Continue reading
This last week I have been in Beijing at the NZ –China Council Forum. Led by Minister Steven Joyce and co-chaired by Sir Don McKinnon, it has been all about building partnerships.
There were about fifty New Zealanders there, including industry folk and staff from the relevant Government ministries – Trade and Enterprise, Foreign Affairs and Trade, and Primary Industries. And there was a similar number of Chinese people from industry and their government.
Now to some people, the idea of building partnerships with China is anathema. Ten days ago I was involved in a passionate debate in Wellington about just that topic. It is all right to trade with the Chinese, so the argument went, but we should not think of partnering. The Chinese are different, and we should not in any way imply support for their way of doing business. Continue reading
Five months ago I wrote that whatever happened at Silver Fern Farms, it would be like an earthquake within the meat industry. Given that Silver Fern Farms is New Zealand’s largest meat company, and with the status quo unsustainable, it could not be any other way.
The offer that has now come forward from Shanghai Maling is remarkable. This offer, once regulatory approvals are received, will change Silver Fern Farms from being large but financially very weak, to being large and financially very strong.
Apart from mid-season working capital, Silver Fern Farms will be debt free and with cash in their war chest to ‘take it’ to their competitors. Continue reading
For some time there has been a view developing within New Zealand that we have too many eggs in the dairy basket. There is also a view that we are over-exposed to China.
I do not share those perspectives, at least when they are expressed in such over-arching and simplistic terms. In contrast, I note that dairy is one of the things we are good at, and that our pastoral dairy resources are not easily put to alternative profitable use. Continue reading
In recent weeks I have been traveling in Western China. It is just over a year since I was last there, and as with every visit the changes are visible: more fast railways, more four lane highways, and lots more apartment buildings.
This visual perspective contrasts with what we are reading in the media about China’s declining economic growth. Which is correct? Well, both perspectives are valid. Continue reading
With calving in full swing, most dairy farmers have no time to think about anything but today. Things are indeed grim and the short term focus has to be on survival. For the next few weeks, there is some logic to focusing on the simple day to day things that can be influenced. Even in the good times, these are the things that often separate out the best from the not so good. Continue reading
[An earlier version of this post was first published in the NZ Herald on 11 August 2015]
There is no escaping that Fonterra’s path forward has to be closely linked to China. No-one else needs and has the ability to pay for New Zealand milk in the quantities that we have available to supply.
Whether that means we are over-exposed is a matter of perspective. But that perspective does not alter the reality that China is the opportunity. Whether or not the associated risks also become a reality is largely up to Fonterra itself. Continue reading