Ferrier's paycut a timely warning to other agricultural businesses

Well done Fonterra and well done Andrew Ferrier on taking a whopping great pay cut of $360 000 even if his salary is in the realms of fantasy at $3.62 million a year.

When you look at it on paper, three million seems a heck of a lot to pay the figurehead of an organisation, but converted to US dollars it's paltry compared to what he could get working elsewhere in the world, especially it seems, in a recession.

Have a read of this blog written by Rick Newman in the US regarding the trend upwards of CEO salaries in the States despite the gloomy economic conditions:

It's good to be CEO, even in a recession. Especially in a recession.
Hewlett-Packard's stock price fell 29 percent in 2008, and the company announced plans to lay off 25,000 workers after it acquired Electronic Data Systems. But CEO Mark Hurd didn't feel the pain. Hurd earned $43 million in 2008, a 73 percent raise from his 2007 pay. Perks included $136,000 worth of personal travel on corporate jets, paid for by shareholders, and $7,472 in travel expenses for Hurd's family, according to an analysis of HP's annual proxy filings by shareholder activist Eric Jackson. Several other top HP executives earning multimillion-dollar pay got double- or triple-digit raises.
[See 10 gaffes by doomed CEOs.]
Hurd has been a strong CEO since he took over in 2005, generally credited with enhancing HP's profitability after a period of drift. But the big pay hikes during a dismal year are generating some of the toughest criticism of Hurd's tenure. "There are some very troubling aspects about how he, his management team and his board approach executive compensation and governance," writes Jackson. "Investors should steer clear of this Silicon Valley icon until it gets its act together."
For all the talk of reining in CEO pay and enacting financial reform—even from some CEOs themselves—it's beginning to appear that very little has changed in the way companies are run and executives get paid. A new survey of CEO pay by research firm the Corporate Library finds that median take-home pay among more than 2,000 CEOs fell by 6.4 percent from 2007 to 2008, the first time on record that CEO pay has gone down instead of up. But that was in a year in which the stock market fell by 37 percent and the economy lost 2.6 million jobs. By almost every measure, the vast majority of companies performed far worse in 2008 than in 2007. "While the downturn has affected pay, the link between pay and performance remains weak," says the report. "Such a minimal decline in pay given the massive decline in shareholder value is hardly an adequate response."
A surprising number of CEOs didn't personally experience the downturn at all. Of 100 industries tracked by the Corporate Library, median CEO pay went up in 40. The 10 highest-paid CEOs included seven from the oil industry, which had a banner year as gasoline prices hit $4 per gallon. The others were Stephen Schwarzman of the Blackstone Group, Larry Ellison of Oracle, and Michael Jeffries of Abercrombie & Fitch. Schwarzman earned the most: $702 million. No. 10 Jeffries earned $72 million.
[See how to pay CEOs what they're worth.]
Reformers want to see much tougher rules linking executive pay to the long-term performance of their companies, and a few CEOs took a step in this direction. Lloyd Blankfein of Goldman Sachs endured a 97 percent pay cut in 2008, because the tony Wall Street firm rescinded bonuses for top executives. Jamie Dimon of JPMorgan Chase went without a bonus as well, resulting in a 92 percent pay cut. But both of those companies were big bailout recipients under the microscope of politicians and regulators. And both have paid back all their bailout money, which means Blankfein and Dimon will probably do a bit better in 2009.
[Get ready for the miraculous hollow economy!]
It's likely that overall CEO pay will bounce right back up in 2009 as well. Many CEOs earn a relatively low base salary, with the majority of their total compensation coming from bonuses, company stock, or options to buy stock. The plunge in the stock market last year means the value of CEO-owned stock fell as well, and many CEOs declined to exercise options to sell stock since prices were so low. That has changed in 2009, with the market up smartly. It could even turn out to be a record year for CEO pay raises, as they springboard off of last year's lows. At least somebodies getting ahead.

So good on Fonterra for insisting on a performance based salary. It's just a shame that some of our other agricultural companies are not using the same standard for their bosses and their board sitters...Farmgirl can think of one such fertiliser company that would and should be rife for a pay cut!

Farmgirl on maternity leave but has new important questions for Ravensdown

Farmgirl will be offline for a short time due to maternity requirements, but wants Ravensdown shareholders to consider the following, while waiting for the figures from annual accounts to come out:

1 How is it that if Ballance suffered significantly in the past year due to the global environment and has decided it can't afford to pay a rebate, that Ravensdown is claiming a much stronger balance sheet (again) and paying a rebate. Where is the money for that rebate coming from?

2 Have Ravensdown broken banking covenants and if so how much has that cost shareholders over the past year?

3 What is the debt to equity ratio of Ravensdown now - that is what counts. Pay attention to the level of borrowing and whether foreign exchange earnings is what is paying for rebates rather than profit.

Ravensdown CEO Rodney Green's job hangs on a transparency thread

Farmgirl, unlike the Radio Network, has managed to escape the bullying clutches of the CEO of Ravensdown thus far and has requested a head to head discussion through the radio forum with Rodney Green but has heard nothing yet.

It is very serious and alarming when shareholders seem to be muzzled by the head of a co-operative and are not being allowed to ask the questions that need to be asked at this point of time.

What is even more alarming is that Farmgirl has received further serious allegations against the CEO and his Board regarding some private dealings that shareholders have no idea about.

This company appears to be no longer transparent and the head of it has far too much power and seemingly a weak or frightened Board.

Farmgirl wants Mr Green to front up and answer these questions:

1 Did Ravensdown have a large cash deficit in last year's accounts from operating activities - that actually they didn't have a $40 million profit but a $40 million loss - it only looks that way due to a change of accounting standards and the favourable revaluation of foreign exchange contracts?
2 Were last year's rebates paid from borrowing, not actual profit?
3 That borrowing to pay rebates is a hugely risky venture and not one that shareholders are aware of?
4 That under these current conditions and the fact that Ravensdown is not in great shape the venture into Australia could only be construed as risky?

4a That the directors may not have been fully aware of Ravensdown's financial situation

prior to its move into Australia?
5 Have they made any million dollar plus settlements out of court in the past three years?

6 Are shareholders aware of what might have been paid via settlement out of court in the past

three years?

7 How on earth can Ravensdown be called a co-operative if its shareholders are ill informed and then threatened should they choose to ask questions?

If Farmgirl and other concerned shareholders are right about the situation with Ravnesdown, then it's time all of us did something about it, took back control of the co-operative and got rid of the rot.

This is not defamation Rodney, this is our right as concerned shareholders to publicly voice our view.

Having worked in agricultural newspapers, and knowing how companies can threaten to pull big advertising budgets if anything negative is written about them, this blog becomes vitally important.

Please, share your views, get in contact with Farmgirl if need be and keep asking these questions of your directors until you get the answers clarified.

We will not be silenced, nor will investigations be dismissed.

Are growers being ripped off with Ravensdown DAP price?

And more from our Aussie commentator - something that we as shareholders have suspected.

"They are ripping off growers blind on DAP at NZ$827/t. DAP has been selling on the world market at US$300-US$330 since the beginning of the year, current prices are at the bottom of the range anticipating additional Chinese capacity for June/July, it is well documented and highlighted recently at IFA Shanghai that DAP pricing will continue to be low due to low demand and expected to trade range bound for the medium term. Freight is roughly US$30/t and port/discharge/handling costs roughly US$25/t. This should mean a co-op that sells at “cost” should be more like US$400/t, maybe US$420 which I believe equates to around NZ$620/t?"

All this when Rodney promised Mid Canterbury arable farmers a forward fixed price no higher than $900 plus per tonne for spring delivery. Surely they're market intelligence research must have been better informed...which puts further questions over their honesty with growers and they're research on the Australian venture.

What an Australian commentator is predicting for Ravensdown and it isn't good for Kiwi shareholders...

This just sent to Farmgirl today from a rural Australian follower of the blog.

"In essence Ravensdown is only offering granular urea and they have made a right royal mess of it in my opinion. They have offered growers a “cost” price of A$525/t, however, the current urea price is $480/t, admittedly at the time Ravensdown spruiked to its Kiwi brethren, the price was over $600/t but blind freddy could see the price was tumbling as world urea prices had already started the forecast fall. The Ravensdown marketing machine (double speak in a suit), managed to fear the Australian growers into prices were going up or remaining high and managed to greed NZ shareholders that the price was hugely profitable. Both of these claims are of course...let’s say...less than honest.
The model that Ravensdown are using is causing a backlash in our rural communities, essentially Ravensdown are attempting to cause the demise of the rural store, it is highly unlikely this will be tolerated once the smoke has cleared and this alone will create a huge cost impost for Ravensdown in order for it to compete long term. Secondly, the idea that there was only one large, unloved player in the Queensland market that need be conquered is a major underestimation, not sure whether by design or folly. The notion that the second tier players, us included, along with our large multi-national, are going to sit by and watch our markets get eroded and rural communities and infrastructure become decimated is ridiculous. Ravensdown are in for a fight they have never encountered before, I think there will be significant focus on reducing their profitability and exposing their integrity.
Already we see Ravensdown are showing off their true colours, a part of the deal with Australian growers was that they must belong to Ravensdown in order to access “cheap” fertiliser, and in fact they forced growers to pay $80/t up front partial share payment at time of order but cannot collect it themselves as they are illegally setup for such a transaction (not only has this decimated possible Ravensdown cash flow, but a very expensive court case at NZ shareholders expense in the making we presume). In order to get the first vessel possible, Ravensdown were forced to sellout the growers and offer large parcels to another fertiliser importer in South Australia, paid for by its NZ shareholders.
There are now several large risks at question, the Townsville warehouse is reportedly full of holes, was never suitable for fertiliser and come September when the wet season arrives, any fertiliser remaining will be dumped or relocated at presumably NZ shareholder expense. The vessel calling Brisbane (our major port) is apparently under question as sales volumes flounder and the vessel has to also go to South Australia to satisfy the non-shareholder customer. Rumours for sure, but where there’s smoke there’s fire. Rest assured, any cracks in the Ravensdown venture will be seized upon, exploited and capitalised on to the detriment of NZ shareholders."

Shareholders should be concerned about Ravensdown...

Farmgirl wants to share some important comments passed on to her by a follower of the blog.

"Have you seen the latest Ravensdown Hot off the Press on their web site.What has been said about having to make profits, banking covenants,pressure to retain bank funding facilities, selling foreign exchange,having to restructure etc is just the tip of the iceberg. No wonder they have the pressure on (you) not to let their true financial position be know to shareholders, but the truth will come sooner or later especially with this Australian nonsense and the current banking squeeze.

In the market Ballance are deliberately squeezing them on prices. Ballance set the price and Ravensdown follow a few days later at about the same level. But with sales back and profits and cashflow required to satisfy their banks they desperately need higher prices in New Zealand -they will never achieve this.

This is a deliberate tactic by Ballance - they want a weaker and weaker Ravensdown in the market in order to grow their own market share and improve operational capacities.

Rodney Green said some time ago a 50:50market was not sustainable and he would grow Ravensdown to be 20% larger than the number two in the market. Ballance are effectively following his advice.

The Australian venture and non fertiliser activities is the only way Green can boast that he has been successful and grown Ravensdown - that is his driving force and the force that dominates Ravensdown's activities - but at what cost - he was not in the industry when other misguided fertiliser co-op's collapsed.

Their accounts may just be legal - but their presentations and PR in explaining their true position are on very thin ice - no doubt they will blame the current economic conditions - but their problems are more fundamental and getting to be terminal."

The worrying truth about Ravensdown's cashflow

An adviser thinks Farmgirl should be focusing on the fact there has been such a large cashflow deficit ($109 million) from Ravensdown 'operating activities' (i.e.core fertiliser activities) in the past year and that the current ratio (85.4%debt/assets) is in such bad shape.

"Paying a rebate with those numbers in such poor shape would seem risky, especially when you compare what Fonterra is doing (no unshared supply, no contract milkers, retaining a large portion of the payout). Fonterra seems to be taking a cautious/prudent approach that should see them through these difficult times."

Is Ravensdown doing the same?

Ravensdown not doing anything illegal

Let's be clear about this.
Ravensdown is not doing anything illegal in its financial accounting or in any of its business and Farmgirl is not suggesting anything of the sort.
What Farmgirl is suggesting is that shareholders are not fully aware of the situation financially - by that she means that under the new international accounting standards, although Ravensdown is showing a $40 million profit for the past financial year, the statement of cashflow reflects something entirely different.
This is not opinion - it is fact.
As a shareholder Farmgirl is concerned that on that basis many shareholders may not be as happy about the expansion into Australia as Ravensdown suggests.
Shareholders should always ask questions, and should always question the performance of their company - and for that they should never be punished.

Serious questions need to be asked about viability of Ravensdown's move into Australia

They hate us - those Aussie fertiliser companies that Ravensdown is playing dirty with. And why wouldn't they...Rodders comes in on his big white shining horse to take over the industry, offers the farmers cost price fertiliser and then some, even though it is not maintainable and with a fair wave of his royal hand he wipes out competitors but does he endanger his own shareholders?
Who is paying for Rodney's expansionist ideas? Who indeed...come on Kiwi shareholders, it doesn't take a maestro to work out that if he's not making a profit on the much heralded Aussie advance, the money generated to continue must be coming from somewhere.

Are Australian farmers being put ahead of Kiwi shareholders?

How profitable is the core Ravensdown fertiliser business at present?

And how truthful is Ravensdown being about its profitability, cash flow and debt levels in its annual accounts?

The truth might surprise you.

Keep watching this space over the coming days and ask the questions that need to be asked of your so called 'co-operative'.

Ravensdown defending involvement in animal nutrition market

Too little...too late.

After recent criticism (Farmgirl being among them) Ravensdown have decided to bring out the PR swagger Kings to persuade arable farmers that their involvement in the animal nutrition market (namely the palm kernel market) is actually good for them.

And I expect they will do a magnificent job of sugar coating what is still a kick in the teeth to their cropping farmers, but they forget one thing, and that is while they spin it anyway they like there is still no way that any palm kernel sold from Ravensdown benefits a substantial number of its shareholders.

Regardless of the waffle they express about how it is encouraging some North Island farmers to add grain as well as palm kernel to their mixes and how they are actually trying to help our industry, it does not disguise the fact that they should not be in that market in the first place.

As I've said before Ravensdown is a farming co-operative. It is not there for dairy farmers alone, sheep farmers alone or cropping farmers alone. All we ask is that we have fertiliser at decent prices and leave the animal nutrition market alone.

So it is with trepidation that we will attend the meeting with the big guns on the 7th April. I'm sure, as happened the last time I posted on this matter, that I will have some anonymous poor comments again from directors and those trying to protect their own jobs but I do it for a valid reason - in the name of trying to achieve fairness across the board and keep the co-operative honest.

Thank God for fertiliser competition

Yet again it has been brought home to us here how vital competition in the fertiliser market is with the grumblings coming from UK farmers about the monopolistic industry there.

The latest fall in nitrogen prices in Britain has been met with contempt by farmers who ordered early and are now footing an expensive bill for their trouble.

UK Farmer's Weekly reported many farmers had a perception that the UK fertiliser industry in the form of Growhow UK has excessively profited at their expense - a serious charge, but probably not that far wrong.

Growhow marketing manager Ken Bowler denied the monopoly his company enjoyed had caused the high prices, saying while Growhow was the one remaining manufacturing supplier they still have to compete with opportunistic sellers.

But farmers do feel cheated and it serves to remind us how lucky we are to have Ravensdown and Ballance battling it out for market share. It's true fertiliser prices have been high this season due to international prices - this is not a problem British farmers face alone.

Here we grew wheat when Urea was $1100/tonne and now we could grow that same wheat for $690/tonne. But unlike our English counterparts we can afford to be pragmatic about it, knowing that with the competition in our industry the co-operatives have to bring the prices down as quickly as they possibly can and not drag their feet for extra profit share as seems to be happening with Growhow.

Currently the UK depends on 60% of its fertiliser from imports so it could benefit immensely from having more competition.

Here are the current UK fertiliser prices for March 2009 (£/t delivered):


UK SP5 34.5% N
£265-270

Imported urea Imported AN (full analysis)
£280-300

Granular(dependent upon quality)
£240-270


All illustrated prices are based upon 24t loads for cash payment the month following. Prices for smaller loads and 50kg bags will vary considerably.

For further information go to: http://www.fwi.co.uk/Articles/2009/03/11/114677/global-marketplace-sees-fertiliser-fall.html

Ravensdown and a whole can of whooey

The latest PR offering from Ravensdown on its palm kernel business was nothing more than a slippery backslide designed to do nothing more than calm the angry hordes of arable farmers who make up a substantial percentage of Ravensdown's fertiliser profits.

Talk about biting the hand that feeds you. First they try to make a buck at the expense of cropping farmers by importing palm kernel to dairy farmers, when those very same farmers might have purchased wheat from their New Zealand neighbours, and now they have fobbed the protests aside by claiming that they are the arable industry's saviour, charging in on a white horse.

Their PR doctors should be given a pay rise (the palm kernel profits could be the trick) for their claim that by adding a small amount of grain to PKE this season they have created a 'new' domestic grain market for farmers.

Very few wheat farmers sell their grain for the purpose of Ravensdown's diffusive business plans and two major points have been missed in the process.

Ravensdown is a farmer's co-operative - not a dairy farmer co-operative, not a sheep farmer or arable farmer co-operative, but a united farmer's co-operative and as such any move by the directors to go into a business which seriously disadvantages one group of farmers like the palm kernel imports does should be vetoed.

These board sitters should be sacked if they can't even stick to the core principles of a co-operative and arable farmers should vote with their feet and buy from the opposition until such time as Ravensdown sees fit to even up the playing field again.

Imagine the outrage from dairy farmers if Ravensdown went into importing milk powder to those beef farmers breeding bobby calves. It is the same thing.

They are a fertiliser co-operative and these decisions serve to drive a wedge right through their community of shareholders. Many were unhappy about the decision to stray from their core business of fertiliser when they decided to go into agri-chemicals and many more may be unhappy if this foray into palm kernel imports proves marginal on the bank sheet as some suspect it might.

If Ballance were smart they would move in for the kill. There has never been a more opportune time.