300 jobs to go at Fonterra

Fonterra Co-operative Group said about 300 jobs from its head office in Auckland would go after a review of its support services, saving the company $65 million, or $216,666 per position, a year.

Fonterra signalled the job losses when the review started in May. The review is expected to be completed by October once people have worked out notice periods, Fonterra said.

Chief executive Theo Spierings said the review had identified opportunities to reduce duplication and layers of management within the corporate office and opportunities to progress Fonterra's strategy implementation.

"We are investing in growth and it is important to ensure our people are working on the right things and that we are spending our capital on the right priorities," he said in a statement. "We are confident the review has achieved this."

It was the biggest management shakeup under Spierings, who took over from the previous chief executive, Andrew Ferrier, in 2011.

When Fonterra first announced its intentions in May, the price of units in the Fonterra Shareholders Fund (FSF) spiked up by 2.5 per cent to just over $8.00. The price has since retreated, with the units trading today at $7.40, up 2c from Monday's close.

Fonterra, which imposed a hiring freeze in February, said in May the $65m in cost savings would add to the $60m of cost cutting already targeted for 2013.

One fund manager said the benefits of cost savings would most likely end up with the farmer-suppliers, rather than the unit holders. He said unit holders would benefit, up to a point, from a leaner, more focused, business. "But my understanding is that the bulk of those gains go back to the farmer supplier, rather than the FSF shareholders," he said.

The announcement marks the biggest layoff at the dairy giant since it cut workers in 2006 with the closure of manufacturing plants. Fonterra's total workforce is about 16,000 worldwide.

In May, Fonterra announced a shakeup of its Asia Pacific/Middle East/Africa unit with the departure of managing director Mark Wilson.

In March, Fonterra posted a 32 percent gain in first-half profit to $449m. In May Fonterra raised its forecast farmgate milk price of $7.00 per kg of milksolids - a $1.20 per kg, or 20.7 per cent, improvement on the 2012/13 season's forecast payout.

 

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