2 Sep 2019

Financial Markets Authority reacts to complaint about Fonterra's books

2:33 pm on 2 September 2019

The Financial Markets Authority is seeking more information from Fonterra's management over its forecast loss and major asset writedowns it announced in August.

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Fonterra Photo: 123RF

The dairy giant announced in August it would wipe up to $860 million off the value of its major assets, after a full review of the business found they were overvalued, and forecast reported annual losses in the realm of $590m and $675m.

Fonterra was due to reveal its full-year financial results on 12 September.

The Financial Markets Authority (FMA) confirmed today it had received a complaint about Fonterra's books.

"The FMA has engaged with Fonterra's management and asked for information regarding concerns about Fonterra's recent announcement and its pending financial statements for the last period," said an FMA spokesperson.

The complaint came from dairy farmer and Fonterra shareholder Colin Armer who said the writedowns were the appropriate strategic move for the company but the timing was of concern.

"My question is why did not the auditors force that to happen in recent years when it was plainly obvious there were assets that were overvalued and under-delivering in terms of earnings, not just on an asset-value basis, but they clearly weren't delivery money earnings either."

Fonterra defended its rationale and chief financial officer Marc Rivers said the impairments were based on its recent review of the business and were in line with market disclosure obligations.

However, he cautioned the numbers were all approximates and had not yet been audited.

"The numbers could change following the end of year audit process, and we will be releasing the final numbers with our annual results on 12 September," Mr Rivers said.

Mr Armer would await the outcome of his complaint with interest but for now, he was more concerned with seeing reform in the Fonterra Shareholders' Council.

"We've got a shareholders' council who I would call inept and I would stand by my words today, they are there to represent the owners of the business and I don't think they've done their job well."

Mr Rivers promised shareholders would get a say after the annual results release.

"Along with other members of the Fonterra management team and board, I'll be out answering shareholder's questions with them face-to-face at our regular series of result meetings."

Fonterra said it would continue to work with the FMA throughout the reporting process.

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