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Waikato farmer says Fonterra needs to be held to account after $605m loss

By Andrew McRae of rnz.co.nz

A Waikato dairy farmer says some members of Fonterra's management need to be held accountable for bad investments made over the past few years resulting in the company reporting a net loss of $605 million.

The loss, while at the lower end of the forecast range, was largely due to asset write-downs of about $826m.

Orini farmer Allan Crouch milks 500 cows on his North Waikato farm.

He did not believe Fonterra deceived farmers into supporting big investments overseas in the past few years but felt it just got out of control.

"They brought us all along for the ride with glossy projections of where it would lead us and we basically had no choice but to go along," he said.

"Some of the investments currently being reassessed in line with its new strategy means that maybe there have been poor investments and it's really just taking stock of everything now and starting again."

He said the massive loss came as no surprise, as it was forecast, but it was still very disappointing.

"And you really have to wonder where these write-downs came from and why they weren't brought to notice earlier and some people may be needed to be held accountable for not showing there were investments that were poorly performing earlier."

Mr Crouch said trust in Fonterra had been shaken and the company would need to rebuild that trust.

"As a farmer, you really have a trust in the auditors, you have a trust in the shareholders' council, you have a trust in the directors and the people that are there running the company that they are doing what is right for us all."

Gary Reymer has been a dairy farmer for about 40 years and farms near Cambridge.

He is not too worried about the financial result, describing it as only a book entry that focuses on the write-downs, but ignores the value of the company's brands.

"I'd say a lot of listed companies would go and look at all their brands and say these are worth x-billion dollars now. We only look at the things half-empty, not the things half-full, so I look at the cash."

Mr Reymer disagreed with people who claimed the company was in a terrible position.

"I think the key thing farmers should look at and realise is that if you go back pre-Fonterra, a lot of these sort of things happened but they happened behind closed doors because we couldn't see past the Dairy Board, we couldn't see past our own little dairy companies and so Fonterra has opened up the transparency and the business is far far greater than what we had 20 years ago."

Near Te Poi in Eastern Waikato, Matthew Zonderop is a sharemilker with 400 cows.

He is pleased with Fonterra's new strategy of wanting to become a leaner more focused business aiming to return to profitability.

"We are all sceptical around turning-the-tanker around, excuse the pun, but they are managing to do it through some smart innovation and good management practices now, so it is looking really positive, but there is still a long way to go."

He said the company must get back to the basics.

"Strategically it is a good move, the milk pool is here in New Zealand, we do it very well, we are very good at it, so we should concentrate on our own doorstep."

The milk payout for the season just ended is $6.25 per kilo of milk solids. This was forecast and is seen as a positive by farmers.

Though Mr Crouch was hoping for a higher figure to help off-set growing costs.

"Even though they said it was the third year over $6, but with all the compliance costs that we are facing now and going forward, you know it's just going to have more costs on us, so anything over $6 needs to be there just to make it profitable."

Farmers will be waiting with interest Fonterra's Annual Meeting in early November when there are likely to be further questions about the company's new strategy and its plans to return the co-operative to profit.

Orini farmer Allan Crouch. Source: rnz.co.nz