The resolution will remove the need for Fonterra to pay cash out to farmers reducing milk supply

The resolution will remove the need for Fonterra to pay cash out to farmers reducing milk supply

Fonterra shareholders have voted in favour of changes to the New Zealand dairy co-operative’s constitution that will allow share trading among farmers.

The resolution – Trading Among Farmers – received an 89.85% vote in support at a Fonterra meeting today (2 July).

Fonterra chairman, Sir Henry van der Heyden said the move to ‘Trading Among Farmers’ would be “a lasting solution that could remain at the core of our co-op’s capital structure for many years to come”.

“Effectively our vote today will, together with the co-op’s new retention policy, take capital structure off the table for the foreseeable future,” van der Heyden said.

The support for the change, the chairman added, showed a clear awareness and understanding among farmers of the need to evolve and further strengthen Fonterra’s capital structure.

“We knew when Fonterra was formed nine years ago that we would need to evolve our co-op’s capital structure and develop a durable solution to address redemption risk,” van der Heyden said.

“We had great participation from our farmers in shaping this proposal, and the first two steps that we passed in November. This vote is the result of a lot of robust, healthy discussion within the co-op,” he added.

The chairman said ‘Trading Among Farmers’, where farmers buy and sell shares from each other through a market, rather than the co-operative, would remove redemption risk – the need for Fonterra to pay cash out to those farmers leaving or reducing milk supply.

“This will stop money washing in and out of Fonterra’s balance sheet from season to season and provide permanent capital to grow returns.”