I write to draw your attention to significant and misleading error in the December issue of Management. In your cover story article, on page 27, you state that:
“Fonterra’s performance was far cry from prospectus expectations of an operating profit of $5.7 billion on revenue of $14.1 billion. The company’s $13.9 billion turnover in the year to May 31 was close to expectations, but the promised profit was turned into disappointing $50 million loss.” This is patently wrong and grossly misleading. Fonterra issued prospectus, dated 25 October 2001, to support the group’s capital notes issue. Fonterra’s 2001-02 Annual Report (page 66 under note 26) quite clearly compares the group’s forecast financial statements reflected in the prospectus to the audited annual accounts.
The financial forecasts contained in the prospectus were shown in slightly different format reflecting latest accepted accounting practices. The prospectus forecast an operating profit for 2001-02 of $5.961 billion with all but $13 million of this figure (ie $5.948 billion) being returned to farmer shareholders by way of payout for milk solids. This was quite clearly stated in the prospectus (page 33 of the statement of Financial Performance). Certainly it is incorrect and grossly misleading to state, as your article does, that ‘the promised profit’ of $5.7 billion became $50 million loss.
Accurate comparisons between forecast operating profit and our actual operating profit reflect variances within tolerable limits, and especially when you consider the volatile nature of the commodity and currency markets we are operating in.
Graham Stuart, Chief financial officer
Fonterra Co-operative Group
Letters: Column clarified
With reference to Firming up On People, the column on strategic human resource management I contributed to your February issue, I feel I need to make couple of points clear. There has been no adequate theory, and I believe this has stifled and limited the impact of HR and has restricted endeavours to forge the sort of long-term link between people and firms such that both benefit. Most recently I have developed model of strategic human resource management that resolves the issues. As scientist I claim no necessary validity at such an early stage, I do claim it contains enough as to justify serious consideration. The paper is not hard to read and the summary and conclusions will match readily with the understanding and instinct of any CEO or HR strategist. The paper may be downloaded free from www.grlphilosophy.co.nz, and is entitled People and profits. There is also supporting half-day top team review should any firm seek to review and revise its HR strategies looking toward better performance.
Graham Little, PhD AFNZIM
