Photo: Photo / AFP
Fonterra has released its new strategy to pay more in dividends to shareholders and get a higher return on capital.
The company’s revised business strategy aims to focus on its high performing ingredients and food service businesses to grow value.
It has increased its target average return on capital to 10-12 percent, up from 9-10 percent, and a new dividend policy of 60-80 percent of earnings, up from 40-60 percent.
Chief executive Miles Hurrell said building trading capability for the company’s dairy ingredients will help grow the Farmgate Milk Price and earnings.
He said expanding the food service business in China will also help boost value.
Chairperson Peter McBride said the new strategy will support farmers.
“The co-op exists to provide stability and manage risk on farmers’ behalf, while maximising the returns to farmers from their milk and the capital they have invested in Fonterra.
“Through implementation of our strategy, we can grow returns to our owners while continuing to invest in the co-op, maintaining the financial discipline and strong balance sheet we’ve worked hard to build over recent years.”
The strategy revision follows the decision to explore selling Fonterra’s consumer brands, including Anchor and Mainland as well as the Sri Lankan and Australian businesses.
Hurrell said: “We continue to have significant capital investment needs ahead of us to maintain fit for purpose assets and we can meet these investment requirements while maintaining our strong balance sheet. We also intend to make a significant capital return to shareholders if we divest our consumer business.”