FrieslandCampina Members’ Council approves Board proposals

15 December 2010

On 15 December 2010, the Members’ Council of dairy co-operative FrieslandCampina U.A. approved proposals by the Board concerning changes to the reservation policy of the company Royal FrieslandCampina N.V., the milk price system, seasonal charges and payments and the fixed cost allocation/volume surcharge. The changes to the reservation policy mean that from the 2011 financial year, 50 percent of the annual profit of the company will be added to the company’s general reserve (compared with 60 percent up to and including the 2010 financial year), 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 to the member dairy farmers in the form of fixed member bonds (currently 15 percent).

Of the Council members votes 90.4 percent were in favour of the proposal to amend the reservation policy, 9.0 percent were against and 0.6 percent abstained. This change was prompted by the three-year evaluation of the reservation policy. The performance and financial position of the FrieslandCampina business offer sufficient scope for this change.

Milk price system
By 86.2 percent of the votes in favour and 13.8 percent of the votes against, the Members’ Council also approved an adjustment to the milk price rule for setting the milk price system, seasonal charges and payments and the allocation of fixed costs, combined with the volume surcharge. These adjustments were also made in response to the three-year evaluation.
From January 2011, the guaranteed price will correspond with the weighted average of annual 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 guaranteed price, the performance payment (30 percent of the profit) and the issue of fixed member bonds per 100 kilograms of milk (20 percent of the profit). This last component is not currently included in FrieslandCampina’s milk price.
Various adjustments will be made to the seasonal charges and payments. This arrangement encourages dairy farmers to supply more milk in the autumn and late summer and less in the spring. The adjustments will make the scheme simpler and more transparent.
The adjustments to the volume surcharge essentially involve a reduction in the volume surcharge for larger companies, linked to an increase in the fixed cost allocation for all dairy farmers from 360 to 960 euro per annum. There is a cap for very small dairy farms.

Interest charges on member certificates and member bonds
In the context of the three-year evaluation, the Board has also decided 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). This change will take effect on 1 June 2011.
The increase is being made in response to an appraisal of market trends.

Discussion with members
The Board of the FrieslandCampina dairy co-operative discussed all these proposals with the member dairy farmers in the autumn. The Board met with over 8,000 members and affiliated persons at more than 80 meetings throughout the co-operative’s total area of coverage in the Netherlands, Germany and Belgium. Over 40 percent of the members were present. The reservation policy and the rules for fixed costs retention and volume surcharge were the most discussed themes, with opinions among the members divided.

New vice-chairman
At the Members’ Council meeting, it was announced that the Board of Zuivelcoöperatie FrieslandCampina U.A. and the Supervisory Board of Royal FrieslandCampina N.V. had appointed Piet Boer as vice-chairman of both Boards. Mr Boer succeeds Sybren Attema, who is standing down as a member of both Boards and will not be available for reappointment. Mr Boer runs a dairy farm in Biddinghuizen, the Netherlands.