Fonterra farmer share application period closes January 21

Fonterra’s farmer shareholders have until next Thursday (21 January 2010) for their initial opportunity to buy additional shares in their Co-operative following last year’s changes to capital structure.

Under the changes, which received around 90 per cent support from farmers voting at November’s annual meeting, farmers now have greater flexibility in the number of shares they own in proportion to their milk production.

Rather than adjusting their shareholding up and down each season strictly in line with milk production, farmers can now hold a buffer of up to 20% additional “dry” shares not covered by their production. As an incentive to hold dry shares, all shares will now be eligible for dividend payments based on Fonterra’s profitability.

Fonterra chairman Sir Henry van der Heyden said Fonterra had given farmers an opportunity to adjust their shareholdings now because the capital structure changes had been introduced midway through the current season.

“Although any funds raised will be welcomed, we are setting no expectation on the amount of additional share capital that may be raised during this initial application period.

“We appreciate all farmers’ circumstances are different. Cash flows continue to be tight for many farmers which may affect their ability to invest in additional shares right now.”

Sir Henry said the capital structure changes were not just intended to raise additional capital from dry shares, but also sought to reduce the risk of capital leaving the Co-operative through share redemptions when milk production fell.

“As drought conditions start to bite in some parts of the country, it is becoming apparent that milk production will be lower this season for a significant number of our farmers.

“But farmers who expect their production to be higher than their current shareholding should consider whether they wish to buy more shares, to receive the full financial benefits available for share-backed production this season.”

All farmers will have the opportunity to increase their shareholdings during future windows, the next being the end-of-season period in mid 2010, Sir Henry commented.