#TGD: Job cuts please Fonterra investors

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Dairy juggernaut Fonterra is proposing to axe 300 corporate jobs and sharemarket investors have lapped up the cost-carving move, driving up the share price over $8 in a response that surprised analysts.
The Fonterra unit price on the NZX yesterday jumped 2.69 per cent to $8.02 on the back of chief executive Theo Spierings’ announcement that the company’s support services structure was under review. The shares closed up 3.07 per cent at $8.05.
It would be the first swathe of redundancies at New Zealand’s biggest company under Spierings, who took up the job in 2011. The proposed changes would provide savings of $65 million a year, before restructuring costs, he said.
Jobs under review are in Fonterra’s Auckland and Hamilton offices. The company would not reveal how many corporate jobs are in those cities, but said about 50 roles potentially affected were vacant because of a staff freeze imposed in February.
The world’s biggest dairy exporter has annual revenues nudging $20 billion and employs 11,000 people in New Zealand and a total 17,000 people globally.
The proposals were designed to enable Fonterra to deliver its growth strategy, and consultation with staff was under way, Spierings said. The review will finish at the end of this month.
Mark Lister, head of research at Craigs Investment Partners, said the market always liked moves to reduce costs and generate efficiencies, but he was surprised at the strength of the reaction.
«It was reasonably well signalled that we would see a cost-out strategy . . . The detail is new but the thematic isn’t – it’s almost like the market was surprised.»
Lister said investors might have been surprised at the size of the projected cost savings but the market was so strong at the moment that any good positive news for earnings resulted in a good effect on a share price.
Fonterra was having a very good run, Lister said. At the beginning of the week the share price was $7.05. «It’s rivalling Xero.»
The dairy sector continued to be in favour and Fonterra was still viewed by investors as a very unique asset, Lister said.
«It’s looking quite pricey though. It’s reasonably richly priced at this level.»
Spierings said Fonterra had a clear strategy to drive growth.
«While we are investing in growth, we have to make sure our people are working on the right things and that we are spending our precious capital on the right priorities.
«The review has identified potential opportunities for us to deliver a range of corporate services centrally, reducing duplication and removing layers of management.»
Most of the savings would be reinvested to support Fonterra’s growth priorities and would be additional to the $60 million in cost savings the company had already committed to deliver this year.
A decade ago Fonterra turned its back on Wellington, cutting its last 80 staff in the city, leaving behind just a handful.
In 2002, Fonterra announced 400 information technology staff would lose their Wellington-based jobs. The former Dairy Board had about 700 staff in Wellington.
Last week, Fonterra announced a shakeup of its Asia Pacific/Middle East/Africa business division, including the departure of managing director Mark Wilson.
In March, Fonterra posted a 32 per cent gain in first-half profit to $449m and lifted its forecast payout to farmers to $5.80 per kilogram of milk solids from $5.50.
The company also signalled its intention to cut the number of consumer brands in Australia to counter intense competition.
 
Source: Stuff

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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