Balance sheet pressure forces ‘tough call’ for co-op.
Fonterra staff earning more than $100,000 have been told they will not get a pay rise this year.
The decision was announced to staff yesterday in an email from chief executive Miles Hurrell.
“This has been a tough call but it’s also the right one,” he said.
“Together as a co-operative we must do what’s right, working together to reset our business and get us back to a position where we can be proud of our financial performance.”
Hurrell said the freeze affected all salaried employees on individual employment agreements. Waged employees or those earning less than $100,000 would not be affected.
The announcement said no executive bonuses would be paid under the short-term incentive scheme or the sales incentive plan.
However, bonuses will still be available to executives for the year to July 2020.
According to Fonterra’s annual report for the year to July 2018 there were 5764 staff earning more than $100,000, of which 4035 were based in New Zealand.
The freeze affects staff based overseas as well as in New Zealand.
According to a Fonterra spokesperson, long-term incentive scheme targets were not met in the year to July so there will be no payments to executives under those schemes.
Long-term incentive payments for the 2020 year will still be available depending on the co-op's performance.
Last year Fonterra’s total pay bill was $2.1 billion, up from $1.97b a year earlier.
Fonterra is due to announce its results for the year to July on September 12.
The co-op has said it will report a loss of $590-$675 million after booking writedowns of $820-860m.
No dividend will be paid for the year.
This morning Fonterra confirmed its milk price guidance for 2020 at $6.25-7.25 a kg of milk solids.
Fonterra said with only 2% of the season’s milk collected so far it was too early to narrow the forecast price range.
“The global dairy market remains largely in balance but is not without some risk,” it said.
“We are keeping a close eye on international trade tensions and geopolitical risks. The weakening Chinese currency means less consumer purchasing power for US dollar-priced dairy products like ours. There is also continuing volatility in the price of dairy fat.
“On the other side, we have seen good whole milk powder (WMP) demand. Global milk supply growth is slowing and international WMP production expectations are falling.”
