Speaker 1: It's no secret that we went through some pretty tough
Speaker 1: times to go back to twenty seventeen eighteen nineteen, and
Speaker 1: we had to sort of do things differently.
Speaker 2: And we've talked a bit about that.
Speaker 1: Ninety five percent her business is exportant and always has been.
Speaker 1: And you know, there wouldn't be a day go by
Speaker 1: where we don't have some of you we're dealing with
Speaker 1: in some corner of the world somewhere. And what does
Speaker 1: that breakthrough teenology is what is the next you know, protein,
Speaker 1: amino mascid that is this, and milk that we haven't
Speaker 1: yet developed.
Speaker 3: Jodore, Welcome to Shed Lunch, brought to you by Chasy's.
Speaker 3: I'm Helen Madison. Today we look at one of New
Speaker 3: Zealand's largest companies, Dairy co Op Fonterra, and in a
Speaker 3: moment I'll be going upstairs to speak with CEO Miles Huddle.
Speaker 3: But before we get started, here's some important.
Speaker 4: Information investing and involves the risk you might lose the
Speaker 4: money you start with. We recommend talking to a licensed
Speaker 4: financial advisor. We also recommend breeding product disclosure documents before
Speaker 4: deciding to invest. Everything you're about to see and here
Speaker 4: is current at the time of Recording.
Speaker 3: Welcome Miles, thank you for having us at HQ here
Speaker 3: with Fontier and Auckland.
Speaker 2: Please are nice to have you here.
Speaker 4: Helen.
Speaker 3: Let's start at the beginning. I know you've been with
Speaker 3: Fontierra I think nearly twenty five years, is that right.
Speaker 2: November six, two thousand.
Speaker 3: Now you've had a number of roles, it would be
Speaker 3: fair to say in that time, which you'd expect. I
Speaker 3: think you've even been in Russia and Africa, all sorts
Speaker 3: of exotic places. Tell us a little bit about that
Speaker 3: journey to where you are today, and twenty eighteen is
Speaker 3: when you took the helm.
Speaker 2: Yeah, what's been varied?
Speaker 1: As you say, I've lived in a few places around
Speaker 1: the globe, heap of experience and exciting times. A few
Speaker 1: times that I remember fondly that have been a bit
Speaker 1: hairy at times as well, when you're get into some
Speaker 1: places that you may not wish to be in it again.
Speaker 1: But that said, you know that the experience that's given
Speaker 1: me been offshore with our customers, some of our key customers,
Speaker 1: some of our key markets, has been invaluable for me.
Speaker 1: Coming back to New Zealand in twenty fourteen and was
Speaker 1: fortunate enough to sort of lead up the farm Sohols
Speaker 1: business it was, and getting close engaged with the farmer
Speaker 1: shareholders and ultimately given me the opportunity, I think in
Speaker 1: twenty eighteen to step into this role. So yeah, I
Speaker 1: mean it's been at a great career, as I say,
Speaker 1: as you say, twenty five years come this November.
Speaker 3: So if we go back even further, were you brought
Speaker 3: up on a farm or did you have an inkling
Speaker 3: that you would be the CEO of Fterira one day?
Speaker 2: Far from it?
Speaker 1: No, I certainly wasn't born up in rural New Zealand.
Speaker 1: I was brought up in christ Church and got introduced
Speaker 1: to the dairy industry as I say, sort of late
Speaker 1: nineties and moved across in the year two thousand so,
Speaker 1: and my involvement with farming at that point was limited
Speaker 1: to the role you should expect in a corporate role
Speaker 1: within the dairy industry. And it wasn't, as I said,
Speaker 1: until twenty fourteen where I got back and was heavily
Speaker 1: involved in a shareholder interface. Of course, been in a
Speaker 1: cooperative plenty of times, certainly those times and you're offshore,
Speaker 1: will you come back to New Zealand for workshops? Or
Speaker 1: meetings as what it may be, and there are opportunities
Speaker 1: at that point in time be going and spend some
Speaker 1: time on farm and I enjoyed those times actually, and
Speaker 1: I have fond memories and still keep in touch with
Speaker 1: with some of those farmers now that actually hosted me
Speaker 1: and at those times. And so that was I guess
Speaker 1: my first for anto farming. But you know, how can
Speaker 1: you grow up in New Zealand without knowing the impact
Speaker 1: that rural New Zealand has on the economy anyway, So
Speaker 1: that was my involvement.
Speaker 3: It's been quite a journey though, hasn't it. I mean,
Speaker 3: Fonterra today in twenty twenty five is probably quite a
Speaker 3: different company to what you knew right through that tenure,
Speaker 3: I imagine, and if we look at today, it feels
Speaker 3: like the change is more to a business to business
Speaker 3: relationship in terms of your customers. If we look at
Speaker 3: that compared to where it was, it had you know,
Speaker 3: more consumer focus in some ways explort obviously, always how
Speaker 3: would you describe that transition?
Speaker 1: Yeah, but even if I go back to my early
Speaker 1: days in the industry, you have to remember that New
Speaker 1: Zealand went through through significant milk growth. You know, the
Speaker 1: early part of the two thousand and twenty ten, New
Speaker 1: Zealand was growing significant milk through that period, and so
Speaker 1: you know, I was involved at a time where you know,
Speaker 1: the phrase was any any.
Speaker 2: Sale was a good sale.
Speaker 1: And by that what we meant was we had so
Speaker 1: much milk coming at us in the international market. We
Speaker 1: were out there finding new homes with this milk all
Speaker 1: the time. And of course that meant you had you
Speaker 1: were in all channels, you're in all categories, you're in
Speaker 1: all markets, because as I say, every sale it was
Speaker 1: a good sale. We're now you're in a situation where
Speaker 1: milk is no longer in that growth phase, and so
Speaker 1: therefore you can be a bit more selective around who
Speaker 1: you play with, where you play, what categories, and which channels,
Speaker 1: which is also brought about the change in our recent
Speaker 1: strategy around we're going to be more focused to you
Speaker 1: to the point you say, around our business to business
Speaker 1: because we believe that's where our future lies. It's where
Speaker 1: a competitive advantage has always been. We've also had just
Speaker 1: had to be beyond that. When you think about that
Speaker 1: significant milk growth through those through those really part of
Speaker 1: the two thousands, so you know, it's evolving with both
Speaker 1: the dynamics of the company, the dynamic of the industry.
Speaker 1: You play in some of the geopolitical situation that we
Speaker 1: see ourselves in. You know, if you're not focused and
Speaker 1: targeted around where you think you're going to have the advantage,
Speaker 1: you know, you run the risk of being you know,
Speaker 1: running a market if you like. And so from our perspective,
Speaker 1: all those things have played into our new strategy, which
Speaker 1: we launched late last.
Speaker 3: Year thinking of geopolitical Donald Trump, now the president of
Speaker 3: the US, has talked a lot about tariff. So obviously
Speaker 3: we do and I think Fonterra sends product to the US.
Speaker 3: Any idea what impact that might have or is it
Speaker 3: too early.
Speaker 1: Well, he's been vocal, i think, right through his campaign
Speaker 1: around what he's going to do with with tariff, and
Speaker 1: you've seen that play out recently with with Canada and
Speaker 1: Mexico and China. Some of the numbers that he's talked
Speaker 1: about different from what he talked about in the election
Speaker 1: and the election campaign that said, we always expected there
Speaker 1: would be some some changes to what we've probably experienced
Speaker 1: in the past in the past few years. So making
Speaker 1: sure you understand and be prepared for. That is what
Speaker 1: we've been focused on as an organization. But also you've
Speaker 1: got to go back and realize, ninety five percent our
Speaker 1: business is exportant and always has been.
Speaker 2: And you know, there.
Speaker 1: Wouldn't be a day go by where we don't have
Speaker 1: some issue we're dealing with in some corner of the
Speaker 1: world somewhere. And so while this is on a larger
Speaker 1: scale than what we've ever seen probably for quite some time, Yeah,
Speaker 1: we know how to deal with these things. And so
Speaker 1: it's about being diversified and how you go to market
Speaker 1: diversified in your custom relationships globally, making sure you're agile enough,
Speaker 1: you've got a strong balance sheet to withstand things that
Speaker 1: may be throw it at you. So so you know,
Speaker 1: not a great outcome. And what he talks about around
Speaker 1: twis ultimately our perspective is you know that the American
Speaker 1: consumer is probably going to be the loser and all
Speaker 1: of this, you know that the cost will clearly be
Speaker 1: passed on. Already I've seen that play out in the
Speaker 1: last couple of days with Canada and Mexico.
Speaker 2: So not ideal.
Speaker 1: If everyone's in the same boat, I mean, it doesn't
Speaker 1: change our position globally but it's certainly something that we
Speaker 1: need to think about and be concerned about as we
Speaker 1: head into I think a different world era than what
Speaker 1: we've been in previously.
Speaker 3: Thinking of markets, I know, China has always been I
Speaker 3: think your largest. We've just talked about the US, but
Speaker 3: there must be other opportunities Southeast Asia. What would you
Speaker 3: say are the emerging markets and your core markets?
Speaker 1: At the moment, China sort of speaks for itself, and
Speaker 1: it's been roughly a third of our book for quite
Speaker 1: some time, and that comes and goes a little bit,
Speaker 1: and the economy hasn't been great there the last couple
Speaker 1: of years, but we're seeing that re emerged and so
Speaker 1: so again talk about that roughly a third of our book.
Speaker 1: You know, we see you free trading group with the
Speaker 1: likes of the United Kingdom starting to really sort of
Speaker 1: come into its own and we're making some great progress there.
Speaker 1: North America, we've talked about that, but that is a
Speaker 1: good market for us. But remember, you know, the large
Speaker 1: developed economies of Europe, North America, you know, India are
Speaker 1: very protected when it comes to the to dairy access
Speaker 1: and we don't get we don't get free access into
Speaker 1: these countries from a commodity perspective, so it means we've
Speaker 1: got to think differently anyway, and we have done for
Speaker 1: quite some time. So it's around where what is the
Speaker 1: nutritional value of the products we're trying to send, and
Speaker 1: what are the customer relationships where they wanted something unique
Speaker 1: that we have, whether it be from an intellectual property,
Speaker 1: from a nutrition perspective, or even from the wavy farm.
Speaker 1: And so bringing those three things together around and using
Speaker 1: that to access markets outside of the commodity sphere. But
Speaker 1: then you talk about Southeast Asia minutes our backyard, it's
Speaker 1: you know, we see huge prospects through there and continue
Speaker 1: to see prospects. We've been those markets again for for
Speaker 1: a number of years. In it they don't get a
Speaker 1: lot of mention. I think, you know, places like Vietnam.
Speaker 1: It's one of the largest growth stories for us in
Speaker 1: the last couple of years. There's one hundred million people
Speaker 1: in Vietnam. People sort of lose sight of that, and
Speaker 1: it's just around the corner from Olpispeitre.
Speaker 3: So they've got a rising birth rate still and like say.
Speaker 1: The West, yeah, more than the West, but certainly slowed
Speaker 1: down from what you would have seen in the past decade.
Speaker 1: So not not not China stats or Japan or the weird,
Speaker 1: but not also the growth rates that you see in
Speaker 1: the likes of Africa. We still see significant growth. Middle
Speaker 1: East and Africa birth rates are still continued to grow
Speaker 1: a significant rates. So it's slowing down from where they
Speaker 1: have been, but still off a very high base.
Speaker 3: Is it infant formula or the whole spectrum? What what
Speaker 3: sort of ingredients and the like are we thinking?
Speaker 1: So, you know, our focus around the ingredient space is
Speaker 1: mainly in that sports and active lifestyles and the adult nutrition.
Speaker 1: We're not on the pediatric I mean, we supplied some
Speaker 1: pediatric ingredients, but we decided quite some time ago that
Speaker 1: we weren't going to focus on pediatrics and our focus was,
Speaker 1: as I say, the sports and active lifestyles, the medical nutrition,
Speaker 1: and the healthy aging. And so we see those as
Speaker 1: growth categories as those populations. To you to the point
Speaker 1: you made, as those populations start to well, birth rates
Speaker 1: start to decline, you know, the population is moving into
Speaker 1: the into the I guess the middle aged categories. That
Speaker 1: what we call it, and so you know, developing products
Speaker 1: to suit the lifestyles of those people.
Speaker 3: What is the future you think for the dairy broadly
Speaker 3: for New z not just Fonterra. We were always known
Speaker 3: as a pretty hefty dairy producer. The world has changed.
Speaker 3: Where do you see things going? I mean, will we
Speaker 3: be known as we were previously as a dairy producer? Well,
Speaker 3: how do you see that changing with you know, alternative milks, tariffs? Yeah,
Speaker 3: the world's a different place.
Speaker 1: Well, the world is a different place. But I think
Speaker 1: what we've seen even in the last two or three
Speaker 1: years and even go back through through COVID, you know,
Speaker 1: the importance of the rural sector plays in New Zealand,
Speaker 1: the importance of the dairy sector that plays in New Zealand.
Speaker 1: Will I think we'll continue to play out well into
Speaker 1: the future. And we've seen that play out now with
Speaker 1: pretty healthy pricing. And so while there is you know
Speaker 1: that the tariff position, you talk about geopolitics and play
Speaker 1: you know, the rise of alternative products despite that, you know,
Speaker 1: we've seen the milk price, our forecast milk pricess you'll
Speaker 1: be the highest that will ever pay. And so the
Speaker 1: future is and that's against the backdrop of I think
Speaker 1: a growing population globally, a rising middle class, throughout some
Speaker 1: of those Asian economies that we refer to, which is,
Speaker 1: as I say, as our backyard, and people wanting to
Speaker 1: know where their product comes from and how it's farmed.
Speaker 1: And I think we have a unique proposition here in
Speaker 1: New Zealand where predominantly cows are outside, they're grazing on
Speaker 1: the pasture, they're taking advantage of the sun on the
Speaker 1: rain we get in this country, and that's something that
Speaker 1: is I think is quite unique on a global scale
Speaker 1: at scale.
Speaker 2: And that's the other point.
Speaker 1: There are always pastor of farming systems around the world,
Speaker 1: but it's scale. Very few people can do that, and
Speaker 1: so when you sort of marry those things up together,
Speaker 1: it's a unique proposition that very few of anyone can
Speaker 1: do and so that I think has a great future
Speaker 1: for the industry as a whole.
Speaker 3: We're really good at producing milk products, if you like.
Speaker 3: But then it's as you sort of said before, it's
Speaker 3: a secret source of what we do with the oos
Speaker 3: ingredients and the value adds stuff. How good are we
Speaker 3: extracting the science and the formulas all that sort of thing.
Speaker 3: Is that something that I mean, obviously Frontier has pursued that,
Speaker 3: but I mean in New Zealand, will that change, you know,
Speaker 3: our focus from being a producer to someone who's got
Speaker 3: a more value add in there.
Speaker 1: I think there'll always be a combination of both. And
Speaker 1: you know there's a lot of new I say new,
Speaker 1: but you know the last sort of five to ten years,
Speaker 1: a lot of new entrance to the dear industry here
Speaker 1: in New Zealand through through the deregulation of.
Speaker 2: The industry back twenty odd years ago.
Speaker 1: And so you know a lot of those people come
Speaker 1: in the early days and make commodities and that would
Speaker 1: probably make sense to get to get a foothold. But
Speaker 1: as things evolve and you get stronger customer partnerships that
Speaker 1: you know, they play on the same position that we
Speaker 1: do around the pasta system and put some effort in
Speaker 1: time and effort into things like innovation. I can see
Speaker 1: that continue to evolve in New Zealand holding quite a
Speaker 1: strong position when it comes to innovative dairy products.
Speaker 3: Let's look then at the new strategy and the ingredients
Speaker 3: business first. I mean there's the food services which I
Speaker 3: think is more restaurant around the world ingredients and so
Speaker 3: what are we talking how would you describe what that
Speaker 3: business starts.
Speaker 1: Yeah, so I refer to that that aging population and
Speaker 1: and you know, you go, you go to a country
Speaker 1: such as Japan, you know, and you know that their
Speaker 1: population is age and I think that's that's well documented
Speaker 1: and and they're relatively well off by global standards, and
Speaker 1: so you know, consumers are looking for something that can
Speaker 1: can make their life healthier, life goes longer. So so
Speaker 1: of course they get out and they do a bit
Speaker 1: of exercise, and we see that in the Japanese population,
Speaker 1: but they complement that with also their their their diet
Speaker 1: and so they also have a wonderful diet around seafood
Speaker 1: and those sort of things. But they're starting to add
Speaker 1: things like additional protein into their diets and and that's
Speaker 1: exactly where we play. How can we support them by
Speaker 1: adding more protein, more calcium into their diet that may
Speaker 1: they may not get by consuming the general products that
Speaker 1: they that they consume. And so you know that for
Speaker 1: us is right in our wheelhouse around you know, healthy, aging,
Speaker 1: sports and active. Last then you get into the other
Speaker 1: end of the spectrum where you know people are consuming
Speaker 1: you know, medical foods. They can't they can't take anything
Speaker 1: through their mouth. Andy may have some issues with swallowing
Speaker 1: or and so you know, how do they ingest something
Speaker 1: that is good on the gut, but it gives them
Speaker 1: the high protein content that they need to sustain a
Speaker 1: longer life. And so developing products at a very high
Speaker 1: top of the pyramid, if you like that. The it's
Speaker 1: a it's a niche area, but it's a growing area
Speaker 1: again with aging populations. You know, health issues globally, and
Speaker 1: you think about something like North America that have got
Speaker 1: a few health issues in certain areas, and you know,
Speaker 1: we can come up with products to support them, working
Speaker 1: with those multinationals that have very strong relationships with maybe
Speaker 1: the medical or the hospital areas in the North America.
Speaker 1: So that's that's certainly one area. And then at the
Speaker 1: commodity and we'll always have some commodity products to support,
Speaker 1: you know, underpinning their milk price that we need to
Speaker 1: pay a farmer, our farmercyelders. But you know, volatility, which
Speaker 1: didn't exist fifteen twenty years ago in this industry is
Speaker 1: here and it's rife. I mean, prices will go up
Speaker 1: and down quite significantly. And so how is there an
Speaker 1: opportunity for us to take advantage? If you like of
Speaker 1: making some cash out of that volatility to support again
Speaker 1: as you older, so's there's a financial play in that
Speaker 1: in that in that position as well. And then the
Speaker 1: last piece when you talk when you talk about ingredients
Speaker 1: is around how we make the products, and it's it's
Speaker 1: you know, a truck goes on farm and collects the
Speaker 1: milk and drives down the road, dump dumps at at
Speaker 1: a factory, it goes in as white milk, and it
Speaker 1: turns up as a product anywhere along that spectrum. We
Speaker 1: believe there's some significant technologies that we can start to
Speaker 1: bring to a manufacturing process that both reduce costs but
Speaker 1: also think about new products that you may be able
Speaker 1: to develop. So all of that encompassing into what we
Speaker 1: believe is a strong ingredients proposition that that really I
Speaker 1: think we just scratching the surface of it. If I
Speaker 1: look through history, how the potentials as ends.
Speaker 3: Just thinking we'll we'll jump to food service in a moment,
Speaker 3: but just thinking about R and D. That's what it
Speaker 3: sounds a lot like. And as you say there's lots
Speaker 3: of potential, does that mean that the company would be
Speaker 3: spending more in that area? Given you know what you're
Speaker 3: trying to achieve.
Speaker 1: Yeah, we've wrapped up our R and D spend quite
Speaker 1: significantly in the last few years. And so again there's
Speaker 1: a spectrum of that. There's sort of the near term,
Speaker 1: you know, how do we adapt a product that's been
Speaker 1: developed in Palms and North at a research center many
Speaker 1: years ago. How did that get adapted into to suit
Speaker 1: the palette or the consumer and say China or the
Speaker 1: or the consumer in South Korea. And so there's there's
Speaker 1: this sort of short term application work that we do.
Speaker 1: But then there's also what does that breakthrough technology? Is
Speaker 1: what is the next protein or amino acid that is
Speaker 1: this and milk that we haven't yet developed, And there's
Speaker 1: a lot of work that goes on and pumps the
Speaker 1: North every day around our researchers that start to think
Speaker 1: about that, and so we'll continue to invest in that.
Speaker 1: And you referred before around fermented boks and some of
Speaker 1: these sort of things. You know, we you know, we
Speaker 1: believe that will play a part in the future. We're
Speaker 1: in the spectrum of of consumers. Is it going to
Speaker 1: be at the at the you know, the consumers of
Speaker 1: white white milk end of you know, putting on their
Speaker 1: sereal in the.
Speaker 2: Morning or is it or is it going to be those.
Speaker 1: At the medical nutrition And we probably think more towards
Speaker 1: the medical nutrition. And therefore, you know, how do we
Speaker 1: understand how that technology plays out? So, yeah, we are
Speaker 1: investing heavily in those areas. In addition to as I say,
Speaker 1: you know, how do how do we make sure that
Speaker 1: the that the next pizza, cheese, you browns consistently and
Speaker 1: stretches consistently, things things that the consumer just expects.
Speaker 3: So food service, then as I understand that that's more
Speaker 3: like restaurants around the world, and maybe cream mozzarella tell me,
Speaker 3: is that the key things that they're after?
Speaker 1: Yeah, predominantly and and so cream is sort of the
Speaker 1: hero product, if you like, in in the Chinese market.
Speaker 3: I the eleven varieties of.
Speaker 1: Cream, right, yeah, there are and and so you know,
Speaker 1: maybe for you and I you look at it and
Speaker 1: taste it, and and they may seem the same, but
Speaker 1: but the applications are different. And so you know, you
Speaker 1: might you might use a cream to make a past
Speaker 1: the sauce, or you might use a creams that goes
Speaker 1: on on a on a on a sponge cake, and
Speaker 1: they are different creams. And then there are creams that
Speaker 1: go into tea and into coffees, which scones which I
Speaker 1: used differently, And so making sure you've got the right
Speaker 1: product for the right application. Of course, if you think
Speaker 1: about you know, a large bakery chain, you know, you know,
Speaker 1: for them, it's around through put, it's around usability of
Speaker 1: that product, it's around yield. You know, they make a cake,
Speaker 1: how do they ensure that the cake stays a big
Speaker 1: if that's the big in the cabinet and doesn't sink
Speaker 1: over time, over a couple of hours. And so you're
Speaker 1: developing creams to support that. And China has been a
Speaker 1: wonderful market for us probably in the last seven or
Speaker 1: eight years in the main but but it's but it's
Speaker 1: doing very well. But how do we then replicate that
Speaker 1: throughout Southeast Asia? But but we're planned it sort of
Speaker 1: the again the top of the perimid. We're playing with
Speaker 1: consumers that have got a little bit of disposable income,
Speaker 1: mainly in that eastern seaboard, and so how do you
Speaker 1: make sure you can replicate that with consumers that may
Speaker 1: not have that cash and so coming up with cheaper
Speaker 1: products if you like that can go maybe into sort
Speaker 1: of more rural or inland China, or into some of
Speaker 1: those Southeast Asian economies that haven't quite got the GDPP
Speaker 1: capital that China has and that top end. So again
Speaker 1: it's it's it's evolving the products to suit. Then then
Speaker 1: of course you talk about pizza cheese again it's similar markets,
Speaker 1: the western style dies that you see starting to emerge
Speaker 1: through throughout Southeast Asia and into China. But again what
Speaker 1: why not into the United Kingdom again with with with
Speaker 1: our free trade agreement and we've got you know, very
Speaker 1: similar sort of taste profiles the way that the British
Speaker 1: consumer consumes as we do, so we think we've got
Speaker 1: something to offer there and in that regard. So it's
Speaker 1: around just identifying your markets and identifying the categories in
Speaker 1: which you want to play some miles.
Speaker 3: If we think about where you're going with the consumer business,
Speaker 3: it's been well documented that it's possibly an IPO or
Speaker 3: a trade sale, and we're also talking consumer in Fontira,
Speaker 3: Oceania and spread Lanka businesses. Once that's all done and
Speaker 3: dusted at the moment, it's a bit of market sensors,
Speaker 3: so we can't go into the detail. But once that
Speaker 3: has happened, what sort of aspects are you thinking you'll
Speaker 3: divest that money into.
Speaker 1: As you say, we're in the process and the team
Speaker 1: are running fast on that process around the dual track now.
Speaker 1: But an IPO or a trade sale, of course, the
Speaker 1: outcome of that will determine what the proceeds look like
Speaker 1: and what we do that. But we set our strategy
Speaker 1: last year. We set our strategy last year and focused
Speaker 1: on as we've talked about the ingredients business and our
Speaker 1: food service business, you know, digitizing or or upgrading our
Speaker 1: operations facility. We've also talked about sustainability, so there's some
Speaker 1: significant care will spend that is already peaked for those.
Speaker 2: Things that aside, it'd be nice.
Speaker 1: I think there's some some proceeds that are that are
Speaker 1: remaining and the decision will.
Speaker 2: Have to be made.
Speaker 1: It's too early to talk about what that looks like yet.
Speaker 1: But we've also said and we're required to seek a
Speaker 1: shoeholder vote at the point in time when we are
Speaker 1: at a stage of IPO or trade sale or something
Speaker 1: a variant thereof, and at that point in time we'll
Speaker 1: have to give some indications to a shoeholder around what
Speaker 1: those devestment proteins may or may not do so, So
Speaker 1: it's too early to talk about that in any detail
Speaker 1: other than you know, we do have a strong strategy
Speaker 1: now that that's clearly focused on what we're going to
Speaker 1: be good at, where we are good at, and what
Speaker 1: we're going to focus focus on going forward. That'll need
Speaker 1: some capital as will allow sustainability initiatives, but but we'll
Speaker 1: talk to our farmer sholders at that point in time.
Speaker 3: Yeah, sustainability is a big one, and it's taking a
Speaker 3: bit of a back seat with what's happening in the
Speaker 3: US and the like. But I think for Scope three
Speaker 3: and all the things, being a multinational, it's something obviously
Speaker 3: you know you've got to keep up with. I know
Speaker 3: that you've got the pilot farm in Taranaki, you're looking
Speaker 3: to get to zero. But also I think you announced
Speaker 3: only a few days ago a sort of electrification program
Speaker 3: one hundred and fifty million I think it was. So
Speaker 3: we're talking chiling EV tankers and we're talking about boilers
Speaker 3: that were cold going to electrode. Tell us a little
Speaker 3: bit more about that.
Speaker 1: Yes, So that you made a comment there that things
Speaker 1: are gone on the back border with what's happening internationally,
Speaker 1: and while that may or may not be the case,
Speaker 1: these decisions for us are long term and take a
Speaker 1: long time to come to fruition. And so you know
Speaker 1: one hundred and fifty odd million that we announced last week,
Speaker 1: you know they're going to take three four five years
Speaker 1: to really be fully implemented. By the time you procure,
Speaker 1: you you can only pull a site down in the
Speaker 1: off season, all these sort of things. So if we
Speaker 1: were going to run a political cycle or you know,
Speaker 1: run with the political sentiment of the day, you would
Speaker 1: be going to know where we're actually going to get
Speaker 1: on with this stuff. But there's also another factor that's
Speaker 1: often missed through this is there's a security supply.
Speaker 2: Piece in there.
Speaker 1: So sustainability certainly is a key driver and a key
Speaker 1: part of it, but security of supply, and what I
Speaker 1: mean by that is that we may run the risk
Speaker 1: of actually not actually having cold to put in our
Speaker 1: drives and into our boilers at some point in time
Speaker 1: if there is no cold, because there's no resource consents
Speaker 1: to do it. Things like we've also seen the natural
Speaker 1: gas issues that we've seen and he's in in the
Speaker 1: last couple of years. I mean, it's been very tough
Speaker 1: to try and manage our business in the last year
Speaker 1: or two through that situation. So how do you try
Speaker 1: and reduce the risk or reliance on some of those
Speaker 1: other things that that may not be on the ticket
Speaker 1: or may not have been on the ticket to replace immediately.
Speaker 1: So we need to continue to focus on that, I
Speaker 1: think irrespective. But again we talk about scope one and two,
Speaker 1: which is predominantly our boilers and our ev fleet, sorry,
Speaker 1: our tanker fleet, which we are making some plays there,
Speaker 1: but the vast majority of our missions is a cooperative
Speaker 1: are behind farm gate one percent I think are behind
Speaker 1: gate farm gate and predominantly it's methane me saying. And
Speaker 1: so we've got a partnership there with the government, the
Speaker 1: AGRA zero in Z partnership, and we've got to see
Speaker 1: that move at pace to move from ideas and concepts
Speaker 1: businesses they're investing in, and they've invested in a number
Speaker 1: of businesses already globally in the early startups phase. How
Speaker 1: do we move that into mitigants, How do we move
Speaker 1: that into into adaptation and getting to it getting our
Speaker 1: shareholders to a point where they've got some tools they
Speaker 1: can use now or in the relatively near term to
Speaker 1: actually go about get on top of some of this
Speaker 1: methane issues. So that's where the focus on on agrazera
Speaker 1: and Z will be. And and please with the progress
Speaker 1: that that's making already.
Speaker 3: Are we going fast enough? Though it so hard nut
Speaker 3: to crack.
Speaker 1: It is a hard nut to crack, but I think
Speaker 1: we are. And the reason I say that is because
Speaker 1: you want to get this thing right, and you're playing
Speaker 1: with the bol logical system of a car, you get
Speaker 1: ahead of yourself and start to cut corners and not
Speaker 1: do the things properly and do the trials correctly. And
Speaker 1: the implications on the on the animal, the implications on
Speaker 1: the milk, the implications on the on the on the land,
Speaker 1: the implications on the on the final consumer, all those
Speaker 1: things you really want to make sure you do properly
Speaker 1: because you only get one chance at it. So I
Speaker 1: think we are doing it right. You know, we could
Speaker 1: always go faster, but it's it's it's as I say,
Speaker 1: you need to, you need to raw that against the
Speaker 1: risk of going too far. So I'm pleased with the
Speaker 1: progress that the team are making. But you know, twenty
Speaker 1: thirty is not that far away. Is the first stake
Speaker 1: in the ground. So I'm as I'm pleased with with
Speaker 1: where that where farmers are at as well, they're becoming
Speaker 1: more efficient without some of those those tools, and so
Speaker 1: I think we should also acknowledge that.
Speaker 3: Yeah, and it would it be that overseas someone might
Speaker 3: come up with something that would be helpful or is
Speaker 3: it really we are focused here because we have them,
Speaker 3: you know the biggest.
Speaker 1: Well, methane is a global issue. Agricultural methane emissions as
Speaker 1: a global issue. We have a unique parts of system,
Speaker 1: which we talked about before, and so some of the
Speaker 1: tools that are being developed have not been developed to
Speaker 1: support a farming system that cows are outside. And so
Speaker 1: making sure that we can adapt if there are some
Speaker 1: technologies that have developed overseas for different farmsism, how can
Speaker 1: we adapt to New Zealand systems so that egg zero
Speaker 1: are also tasked worth.
Speaker 2: Doing that also?
Speaker 1: And so I see that is another way hopefully to
Speaker 1: solve in the big issue.
Speaker 3: Looking ahead, there's always challenges and businesses you've said, you know, COVID, energy, geopolitical,
Speaker 3: whatever it might be. What do you see for twenty
Speaker 3: twenty five anyway, the main challenges are head forth on.
Speaker 1: Terra you know, I think the geopolitical landscape that we
Speaker 1: see ourselves, and you know, we've been dealing with us,
Speaker 1: as I say, for a long long time. But yeah,
Speaker 1: the situations planning out in Ghars, of the situation that's
Speaker 1: been playing out in Ukraine, you know, the elections that
Speaker 1: we've seen in North America. All these things you know,
Speaker 1: have have seen more come to light, I guess in
Speaker 1: a relatively short period of time. So making sure we're
Speaker 1: nimble enough for that, having a strong balance sheet to
Speaker 1: withstand any shocks that come our way, really strong customer partnerships,
Speaker 1: and so despite all these things that going around us,
Speaker 1: you know, people still need to eat, people still need
Speaker 1: to consume, and if things get hard, you know, having
Speaker 1: the wrong relationships and place globally could sit you back.
Speaker 1: But if you've got these partnerships, the custom partnerships that
Speaker 1: have been around for a long long time, they will
Speaker 1: stand us in good stead. We believe to get us through.
Speaker 1: And then you know, it sounds simple, but the diversification
Speaker 1: of our markets. You know, as you know, while there's
Speaker 1: some markets that we may struggle to deal with sometimes
Speaker 1: because it can be a little bit tough and getting
Speaker 1: cash out of them or they may speak a different language,
Speaker 1: whatever it may be. You know, just having that the
Speaker 1: boots on the ground to be able to deal with
Speaker 1: those markets and those customers because at certain times you
Speaker 1: need them. And so that's important for us and something
Speaker 1: that's helped us to date.
Speaker 3: In terms of investors, for Cheesys and investors anyway. I mean,
Speaker 3: I probably should explain that there are the two types
Speaker 3: of Fonterra shares. Is the co op sheares if CG
Speaker 3: I think it is, and then you've got the Fonterra
Speaker 3: sha hold a fund with the if S if threct fund,
Speaker 3: which is probably what most shares these investors will be
Speaker 3: thinking about. Obviously, investors always look at the outlook and
Speaker 3: where a company is going. China obviously being talked about
Speaker 3: a lot. You've got the farm gate price, those sorts
Speaker 3: of things. The outlook. I think you gave some guidance
Speaker 3: back in December and it would seem fairly, as you say,
Speaker 3: record highs for that farm gate price. Is there anything
Speaker 3: else that's helpful for investors to understand in terms of
Speaker 3: you know, where a company might be headed.
Speaker 1: I mean, look, it's no secret that we went through
Speaker 1: some pretty tough times. You go back to twenty seventeen,
Speaker 1: eighteen nineteen and we had to sort of do things differently,
Speaker 1: and we've talked a bit about that, and you know,
Speaker 1: as a result, our shear for us took a hit
Speaker 1: and probably right rightly so.
Speaker 2: But but hopefully in the last two.
Speaker 1: Or three years, you know, we're showing our investors, we're
Speaker 1: shown our shearholders, we're shown that the unit holders that
Speaker 1: you know we stand up and say we're going to
Speaker 1: do something, we get on and do it.
Speaker 2: We are delivering.
Speaker 1: Our performance has shown that we're delivering and despite a
Speaker 1: record high milk price, you know, earnings and the earnings
Speaker 1: persh year guidance that we've got out there is also
Speaker 1: pretty good. We've we've increased our dividend policy, which also
Speaker 1: shows that that there's a there's a half decent yield
Speaker 1: there as well. So all those things hopefully give some
Speaker 1: confidence to to to the sharholder community that we're here
Speaker 1: for all our stakeholder groups, which includes farmers, unit holders.
Speaker 1: Clearly the New Zeald public have an interest in what
Speaker 1: we do and Wellington obviously like to take a bit
Speaker 1: of interest from time to time. So you know, we
Speaker 1: understand the role that we play. But but you know,
Speaker 1: hopefully the foremanths to date, the clarity of our strategy
Speaker 1: and where we're heading gives that confidence that UNI holders
Speaker 1: and shoolders have in their business.
Speaker 3: So your March results are coming soon, and who knows,
Speaker 3: we can't expect too many surprises, but you're pretty confident
Speaker 3: that things are steady in tracking along.
Speaker 1: Yeah, so that finished over the weekend the thirty. The
Speaker 1: end of January was the end of the half years,
Speaker 1: and so yeah, we're expected to come out in mid
Speaker 1: March with what those results look like. And so yeah,
Speaker 1: there's nothing to get away from our guidance that we've
Speaker 1: got out there at the moment of forty to sixty
Speaker 1: cents and a milk price of ten dollars mid point.
Speaker 3: I think farmers are a bit happier now from what
Speaker 3: from all accounts, as you know, as you say, you're
Speaker 3: sort of a public farmer. Everybody's got an interest in
Speaker 3: Fontierra kind of thing, I know, with the partnership with
Speaker 3: Cheeseys has with Fontira obviously, now farmers can trade their
Speaker 3: years on Cheesya's and do it on their mobile and
Speaker 3: have a more going there. Have you had any feedback
Speaker 3: about how that's been going and it has changed for
Speaker 3: for how to think about their business.
Speaker 1: Yeah, you know there's a broad spectrum. When you got
Speaker 1: eight or nine thousand year old that there is a
Speaker 1: broad spectrum. And I suspect they one or two farms
Speaker 1: out there that still don't have a mobile device, but
Speaker 1: we'll put them aside for the moment. But but you know,
Speaker 1: the feedback I've had is that the simplicity of it,
Speaker 1: the visibility, I think, the visibility without them to sort
Speaker 1: of get back at home at night and open their
Speaker 1: their their laptop or their PC. And so the visibility
Speaker 1: and the flexibility I think is something that that they're
Speaker 1: that that that that they're enjoying. And so you know,
Speaker 1: they've been asking for for more of these things. Their
Speaker 1: shareholders have been asking for for you know, how do
Speaker 1: they become more mobile? How do they do two things
Speaker 1: at once? How do they walk around the farm? Because
Speaker 1: that's you know a lot of these a lot of
Speaker 1: these farmers they got into farming for a reason for
Speaker 1: the lifestyle of actually getting out there doing been out
Speaker 1: there with their cows and been out there on the
Speaker 1: on on the land.
Speaker 2: But how do they do.
Speaker 1: That and actually keep keeping touch and so that the
Speaker 1: more we can come up with tools and ideas like
Speaker 1: this for them are the better. So yeah, world done
Speaker 1: to shares, He's for doing it.
Speaker 3: Miles will end it there. But I've got one last
Speaker 3: question for you. And you've been in the top job,
Speaker 3: if you like, for probably more than five years now,
Speaker 3: it's coming up seven.
Speaker 2: Is that right close to in August?
Speaker 3: Yeah, you're obviously sticking around. You've got more to achieve.
Speaker 3: It does sound like what excites you about the future.
Speaker 4: Yeah.
Speaker 1: I mean there are very few jobs i think in
Speaker 1: New Zealand that had the span that Fontira does. And
Speaker 1: so you know, I'll go to a barbecue in the
Speaker 1: weekend and someone's got a view on Fontier and that's
Speaker 1: that's that's great. You know, the role we play in
Speaker 1: rural New Zealand and the decisions that we make in
Speaker 1: this building around around the world every day have an
Speaker 1: impact on rural New Zealand. That's something that that I'm
Speaker 1: quite excited about. And while it doesn't say we have
Speaker 1: a a lot of influence in Wellington, you know that
Speaker 1: a lot of the decisions we make will so can
Speaker 1: have an outcome also from a political standpoint, So how
Speaker 1: do we try and influence some of the decision making
Speaker 1: for the right outcome for we believe in New Zealand,
Speaker 1: but also from our farmer's shielders. So you know, those
Speaker 1: things do excite me. And as I say, seven years
Speaker 1: come August and I'm silly, I'm still enjoying it. And
Speaker 1: until my wife will my cheirmen tell me otherwise.
Speaker 2: I'll stick around.
Speaker 3: Thanks Myles, I really appreciate you giving us the time today,
Speaker 3: and thanks everyone for tuning in. You can listen to
Speaker 3: Shared Lunch on whatever podcast apps you favor, and you
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