Andrew Ferrier leaves Fonterra with a lot of good things, but there was also some bad and downright ugly as well.
Fonterra recently waved goodbye to its Canadian-born chief executive Andrew Ferrier after eight years in the top job.
As is often the case when a popular and long-serving CE departs a company, Ferrier has been sent off in a blaze of hagiographic media articles about going out on top.
While there is some truth to this, the fact remains not everything Fonterra did under the likeable Canadian’s reign was a roaring success.
Ferrier’s eight-year tenure as chief executive of the country’s biggest company is like one of those Clint Eastwood western’s – a bit of a good, bad and ugly story!
Obviously the good includes Fonterra’s latest financial performance. For the year ended July 31 2010, the company posted revenue of $16.7 billion. This includes a record payout of $8.25, comprising a “Farmgate Milk Price” of $7.60 per kilogram of milk solids for the 2011 season and a “Distributable Profit” of 65 cents per share for 2011.
This is $1.55 ahead of the prior period’s $6.70 and exceeds the previous record of $7.90 in 2008. The cash payout of $7.90 is also a record and is $1.53 higher than the prior period’s $6.37. Meanwhile, the forecast payout to farmers, before retentions for the 2010-11season, is a record $8 to $8.10 per kilogram of milk solids.
Ferrier can also look back fondly on the smoother integration and more united attitude of the co-operative under his watch. When he came on board, there were still a few hangovers left over from the NZ Dairy v Kiwi legacy companies. This was further inflamed when inaugural CE – and former Kiwi boss – Craig Norgate was dumped in favour of the genial Canadian.
Ferrier, to his credit – along with chairman Henry van der Heyden – has instilled a one company culture which has seen these pre-merger rivalries all but disappear for both farmers and staff.
The bad would have to include Fonterra’s continued association with poor-on farm environmental behaviour and the co-ops reluctance to punish farmers who continually transgress. The dairy giant has also been slow – and too often silent – to react to unfair criticism of it and/or farmers on any number of controversial issues including: the aforementioned environmental issues, ETS-related matters, use of palm kernel extract, milk prices and dairy farmers paying tax.
A much more front-footed approach by Fonterra – rather than its risk-averse default setting – is something Ferrier could and should have led.
Meanwhile, the ugly – and the ugliest event to happen under Ferrier’s watch – was back in 2008 when Chinese dairy company Sanlu, of which Fonterra owned 43%, caught up in a melamine contamination scandal in which at least six infants died. Fonterra, and Ferrier, came under intense media scrutiny, Sanlu went bankrupt and the co-op wrote off its $201 million investment.
Another less than pretty moment was the 2006 proposed capital restructure, which was shot down by farmer anger with poor communication and explanation of the scheme by Fonterra. While Fonterra’s Board ultimately carried the can for this, it would have been Ferrier and his executive who came up with the concept.
Now the current TAF proposal is entering similar territory as more and more farmers start to baulk at the idea and Fonterra will have to move quickly to place them or lose this battle as well.
Overall, Andrew Ferrier can be enormously satisfied with his time in charge of Fonterra. However, a ‘warts and all’ view proves his time was not all beer and skittles as some in the media have portrayed it.