Dairy giant Fonterra is expected to post a substantial annual loss when it releases its financial results on Thursday, but as much attention will be on its future plans as on the numbers.
Analysts expect the farmer-owned dairy co-operative to report a net loss of about $150 million for the 12 months ended July, driven by a drop in profit margins across Fonterra's global ingredients and consumer and foodservice businesses.
It will also reflect the large compensation payout to French food company Danone, as well as a write down of its investment in Chinese dairy company Beingmate, which were the reasons for the first half loss of $348m.
Revenue is expected to be down nearly 5 percent to about $20 billion, compared with $19.2b the year earlier.
Harbour Asset Management director Oyvinn Rimer said the market would be listening carefully to hear what the executive team had to say about the review, any change of plans for Beingmate and its debt position, which was likely under pressure.
"Latest set of announcements suggest that the balance sheet is probably a bit stretched, and could see gearing slightly higher than their targets," he said.
"And I think that what we just recently saw with the earnings downgrades and the farmgate milk price downgrade as well, is that they are using that balance sheet flexibility to ensure that debt holders are looked after and to defend the credit rating in the short term."
Over the past month Fonterra has lowered its payout forecast for the just ended season by 5 cents to $6.70 a kilo of milk solids, and also cut its forecast for the season just started by 25 cents to $6.75 per kg.
There will be no final dividend for the year, and earnings will be at the bottom end of its forecast range because the high price of milk had hit the earnings and margins of its high value consumer products.
The newly appointed chairman John Monaghan has highlighted the squeeze the company is going through and its underperformance, while the turbulence at the top of the co-operative has been highlighted by its halting of the search for a new chief executive, and the appointment of company insider Mike Hurrell to step-in while the co-operative's future is reviewed.
Mr Rimer said the key issue was how the company decided to balance its ingredients business at home, versus its drive to create global consumer brands to compete with the likes of global food companies, Nestle and Danone.
"I don't expect any radical changes, at least this week, but over time we could get some steer on how the company is going to play the big asset portfolio back home in New Zealand versus the offshore brands opportunities. That is just a conundrum," he said.
"We'll see if the new management board has any fresh thinking on that ... we'll wait and see."