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Highlights
- Fonterra Co-operative will be starting with on-market share buyback on 30 June 2022.
- The company will allocate around AU$50 million to the buyback programme.
- The company has made this decision considering prevailing prices in the FSM, Co-op’s strategy and overall business performance.
Shares of ASX-listed food and beverage company, Fonterra Shareholder’s Fund (ASX:FSF) surged during the early trading hours after the company shared that it will begin with a share buy-back programme from 30 June 2022.
Backed by the news, the shares of the dairy co-op surged by 4.36% to AU$2.87 apiece at 11:47 AM AEST, with a market capitalisation of AU$295.39 million. The shares were in line with the benchmark index, ASX 200 consumer Staples (XSJ) which was 1.038% high to AU$12,778.500.
Worth mentioning here, is that majority of the ASX sectors buzzed in the green territory today (8 June 2022), with the industrials sector leading the gains.
Including today’s gain, the shares of the dual-listed company rose by 1.82% in the last five trading sessions and by 9.41% in a month. On year-to-date basis, the stock has declined around 21.85% and, in a year, the shares fell 23.56%.
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About the share buy-back programme by Fonterra
The dairy farmer, Fonterra announced that it would allocate around AU$50 million to an on-market buy-back programme. Peter McBride, chairman of Fonterra, said that the company is conducting a share buy-back programme after considering the existing prices in the Fonterra shareholders market along with the business performance and co-op’s strategy.
McBride shared the key reason for announcing a share buy-back programme. He said:
Fonterra said that the programme might run for 12 months. Reportedly, the company will acquire shares at the prevailing market price.
The management informed the shareholders that as per section 65 of the Companies Act, the company could acquire a maximum of 80,667,893 shares over the next 12 months. It represents 5% of the company’s shares on issue, 12 months before the acquisition. This incorporates this buy-back programme and transitional buy-back.
This programme is different from the allocation of AU$300 million Fonterra announced last year (Transitional Buyback).
The management said that it would continuously assess available investment opportunities, market conditions, prevailing share price, and other important considerations throughout the buy-back period. Fonterra has the power to terminate the programme anytime in future.
Image source: © Thanavut | Megapixl.com
Road ahead!
Fonterra aims to become a leader in dairy science and innovation, focusing on New Zealand milk. The company aims to grow food services, strengthen consumers, prioritise the farmgate milk prices and focus on higher-value products in ingredients. By 2030, the company intends to achieve a 40-50% increase in operating profit on FY21.
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