Fonterra releases a new strategy for achieving higher returns on capital

Photo: Photo/AFP

Fonterra has published a new strategy aimed at paying larger dividends to shareholders and achieving a higher return on capital.

The company’s revised business strategy aims to focus on high-performing ingredients and foodservice businesses to drive value.

He increased the target average rate of return on capital to 10-12 percent. with 9-10 percent and a new dividend policy of 60-80%. profits from 40-60 percent

Chief executive Miles Hurrell said building commercial capabilities in the company’s dairy ingredients business would help boost Farmgate’s milk price and profits.

He said expanding its food service business in China would also help drive value.

Chairman Peter McBride said the new strategy would support farmers.

“The cooperative exists to provide stability and manage risk on behalf of farmers, while maximizing the return for farmers on the milk and capital they have invested in Fonterra.

“By implementing our strategy, we can increase profits for our owners while continuing to invest in the cooperative, maintaining the financial discipline and strong balance sheet that we have worked hard to achieve over recent years.”

The change in strategy follows a decision to explore the sale of Fonterra’s consumer brands, including Anchor and Mainland, as well as its Sri Lankan and Australian businesses.

Hurrell said: “We continue to have significant capital investment requirements to maintain the fitness for purpose of assets and we can meet these investment requirements while maintaining a strong balance sheet. We also intend to provide shareholders with a significant return of capital if we divest our consumer businesses.”