The international dairy company, FrieslandCampina, wants to introduce a change to the appropriation of the company’s profit with effect from the 2011 financial year. This proposal is prompted by the three-year evaluation of the retained earnings policy. The performance and the financial position of the FrieslandCampina business offer scope for this change. The members’ Board will discuss this proposal in the autumn with the member dairy farmers of the cooperative. The Member Council of the cooperative will decide on the proposals in December.
The proposal is that with effect from the 2011 financial year, 50 percent of the annual profit of the company will be added to the company’s general reserve (currently 60 percent), 30 percent will be paid out to the member dairy farmers in the form of a performance payment for the milk supplied (currently 25 percent) and 20 percent will be paid out in the form of fixed member bonds (currently 15 percent).
The starting point for FrieslandCampina is that the retained earnings policy, which is set for successive periods of three years, takes account of FrieslandCampina’s desire to pay a leading milk price for all milk supplied by the member dairy farmers combined with the need for the company to perform, to offer continuity and continue to invest. To achieve this, it is essential that there are robust financial ratios for the company, not least because product markets and financial markets are becoming more and more volatile. A robust and healthy company has access to the loan capital it needs and as a consequence can take the steps necessary to maintain its performance in the future and to offer continuity.
Interest charges on member certificates and member bonds
In the context of the three-year evaluation, it is also being proposed to increase the interest charges on member certificates and member bonds from 2.5 percent to 3 percent above the six-month Euribor (Euro Interbank Offered Rate, the interest rate used by a large number of European banks to lend to one another in euros). This change will take effect on 1 June 2011 and affects all member dairy farmers (fixed and free member certificates and member bonds) and former members (free member bonds). This interest charge follows the trends in the market.
Milk price system
The proposal to make minor adjustments to the milk price system is part of the evaluation of the rules. On this basis, the guaranteed price will from now on correspond with the weighted average of annual milk prices for raw milk in Germany, the Netherlands, Denmark and Belgium, including the subsequent payment and formation of registered reserves. This last component is currently not included in the calculation of the guaranteed price. In line with this adjustment to the calculation of the guaranteed price, with effect from the 2011 financial year, FrieslandCampina’s milk price will be made up of the aforementioned guaranteed price, the performance payment (cash) and the issue of fixed member bonds. This last component is not currently included in FrieslandCampina’s milk price.
Discussion with members
The members’ Board of the FrieslandCampina dairy cooperative will discuss these proposals in the autumn with the member dairy farmers of the cooperative. On
15 December 2010, the Member Council of FrieslandCampina will decide on these changes. The Member Council consists of 210 dairy farmers, who have been chosen by the member dairy farmers as their representatives.
The shares in FrieslandCampina are held by Zuivelcoöperatie FrieslandCampina U.A. This means that the 15,300 affiliated member dairy farmers of the cooperative are the owners and the most important equity providers of the company. Some of the risk-bearing capital of the company is registered to the member dairy farmers. Royal Friesland Campina N.V.’s aim is to achieve a leading milk price for all milk supplied by the member dairy farmers.