LETTERS: Err… no

December’s Management magazine piece on New Zealand’s top 200 companies erred in its report of Fonterra’s profit.
Fonterra is co-operative and does not report profit in the traditional, corporate sense. Rather its goal each year is to return as much of its earnings to shareholders as is financially prudent. In 2003/2004, Fonterra distributed to shareholders $5.1 billion by way of milk payout, retaining $16 million. Of this, $9 million came from minority interests and $7 million from parent interests (the figure reported in the table as profit).
A more comparable view of our operating performance can be obtained from the segmental analysis disclosed in the notes to the accounts in Fonterra’s 2004 report.
Graham Stuart, chief financial officer

The figures are not wrong but I agree they could be open to misunderstanding by people struggling to work out the differences between how corporates, SOEs and co-operatives report their figures.
We clearly state that Fonterra, along with 11 others in this year’s Top 200 listing, is co-operative and we’re pretty sure our readers are sassy enough to work out the implications for themselves. We will in future issues include footnote pointing out the differences.
In preparing the listing for us, Deloitte followed the past practice of reporting the results as published. There are number of other co-operatives or trading societies who comfortably meet the Top 200 criteria (turnover plus available audited accounts) and all pass benefit to their suppliers by way of payout which includes profit element in addition to the ‘true’ cost of the supply, whatever this is. We simply are unable to identify the split between the two elements.

– Ed

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