Fonterra to axe hundreds of jobs

In a statement today the company confirmed 523 roles will be cut. (Getty)
In a statement today the company confirmed 523 roles will be cut. (Getty)

Fonterra has announced it is axing 523 jobs at a one-off cost of $12 to $15 million with affected staff beginning to leave in September.

In a statement today the company confirmed the roles will be disestablished as a result of consultation with its completed central procurement, finance, information services, human resources, strategy and legal teams.

Chief executive Theo Spierings said the news had been unsettling for the people affected.

He said however, the co-operative "had to change" if it was to remain strongly competitive in today's global dairy market.

As Fonterra struggled with falling dairy prices, the reduction in staffing numbers would bring ongoing savings of $55-$60m per year.

Mr Spierings said the co-operative's leadership was developing initiatives to deliver value right across the organisation.

"The key aims of the review are to ensure that the co-operative is best placed to successfully deliver its strategy, increase focus on generating cash flow, and implement specific, sustainable measures for enhancing efficiency.

"A simple example already identified by our supply chain team is a logistics solution that increases the utilisation of export containers leaving our distribution centres, saving up to $5 million a year," he said.

Fonterra said the review includes measures to improve profitability at its Australian business as well as a series of additional measures to add more value to the organisation.

"Reducing the number of roles in our business isn't about individual competency; it is about continually improving the way we deliver performance."

Staff have also been informed that on August 5 consultation on new business structures would begin.

Federated Farmers said top management should be leaving Fonterra Co-operative Group if results don't start improving in the next couple of years.

The lobby group's dairy chair Andrew Hoggard said he hoped the job losses were part of a strategy to redirect resources to new areas, rather than a knee-jerk reaction to cut costs as dairy prices continue to fall.

"Fonterra has had a history of knee-jerk reactions like that where it gets rid of a whole bunch of people and then two years later hires them back again, or rather having got rid of people with institutional knowledge, they hire new graduates who can't do as good a job," he said.

Mr Hoggard said farmers were waiting to see if decisions made by top management at Fonterra in the last two years would pay off.

"If we don't, you'd have to say getting rid of a lot of mid-level people were the wrong ones to go. It should be the people at the top making those decisions that pack their bags.

Fonterra has more than 18,500 staff globally and 11,500 in New Zealand.

The job losses are across Fonterra's global operations, with the bulk of the cuts at its finance and procurement hubs in New Zealand, Singapore and Australia. The company declined to break down the staff reductions by unit.

Fonterra wouldn't reveal how many further job cuts are expected.

Newly elected Fonterra Shareholders' Council chairman Duncan Coull said Mr Spierings and his team were employed to make decisions that were sometimes difficult.

Mr Spierings revealed in June that the major review of the business would lead to hundreds of job losses.

The review, undertaken by an internal management team and business management consultancy McKinsey & Co, was started in December when it became clear the global dairy market wasn't recovering as quickly as hoped.

The job losses come as world dairy prices continue to sink with prices in the latest GlobalDairyTrade auction falling 10.7 per cent to $US2,082 ($NZ3,162), the lowest level since July 2009.

Units in the Fonterra Shareholders' Fund fell 1.1 per cent to $4.72, and have declined 21 per cent this year.

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