The FrieslandCampina Members' Council yesterday (Wednesday 16 June) approved the proposal for a new structure for member financing. According to the cooperative, this was by a 'large majority'. At the meeting, Frans Keurentjes stepped down as chairman and his successor Edwin Wunnekink (photo) was officially appointed as chairman.
The approval of the member financing was preceded by a long process with consultation with the members. At the intercession of the members, the proposal has also been amended in the interim. With the plan, FrieslandCampina wants to tackle the imbalance that has arisen in member capital due to the aging of member dairy farmers. The renewed member financing will come into effect on January 1, 2022.
The core of the renewed member financing concerns a link of an important part of the member's capital to the milk supply of the members. The quality of equity also improves by issuing these so-called delivery certificates. There will also be a so-called cooperative solution for the future tradability of member bonds-free.
Believe in cooperative milk processing
As of next year, FrieslandCampina will issue approximately €800 million worth of supply certificates. "An important signal that members believe in cooperative processing of our milk," the new chairman Wunnekink said in a statement. "By adopting the proposal for a new member financing, we as members show that there is still a strong will to work together in a cooperative context."
As of January 1, 2022, the cooperative will issue €100 in delivery certificates per 8,00 kilograms of milk delivered, the group explains. To determine the number of delivery certificates at the first issue, the quantity of milk delivered in the period from October 1, 2020 to September 30, 2021 applies. Members who pay less than €8,00 per 100 kg of milk in fixed member bonds and/or have member certificates can use a deferred payment of up to 12 years.
This is an interest-free, deferred payment obligation of the member to the cooperative. Repayment is made for the first 8 years based on the cash back payment that the members receive as part of the reservation policy. A special arrangement will be made for young members who do not have sufficient financing to pay up the delivery certificates due to a company takeover.
Cooperative solution
For members and former members it remains possible to finance the company through member bonds-free. In order to guarantee the liquidity of the free member bonds, any imbalance in the internal trade market of member bonds-free will be resolved within our own member circle as of 1 January 2022.
If a balance equal to or more than €30 million arises with the liquidity provider before the trading day, the members jointly purchase the excess supply of member bonds free of charge for a nominal amount of €25 million with a maximum of 3 times in a period of 2 consecutive years. According to FrieslandCampina, this cooperative solution also provides more security for former members who still have free member bonds and who may wish to sell them in the future.
Reduce imbalance
In addition, the board of the dairy cooperative wants to reduce the current imbalance in the internal market for trade in member bonds-free. Therefore, in 2022, members will receive a premium if they purchase free member bonds during the trading days of June 2021, August 2021 and/or October 2021 and use the net increase in the number of member bonds-free to finance the delivery certificates in January 2022.
FrieslandCampina also adjusts the reservation policy when the delivery certificates are introduced. The current reservation policy consists of a cash supplementary payment of 35% of the profit, a 10% distribution in member bonds and a 55% addition to the general reserves. For the 2021 and 2022 financial years, 40% of the profit will be paid out as cash supplementary payment and 60% will be added to the general reserves.
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
