Fonterra Cooperative Group's 2015 'Velocity' restructuring doesn't appear to have achieved the savings expected and pushed up the dominant dairy exporter's costs used in setting the regulated milk price.
The dairy exporter bumped up its administration and overhead costs for the 2019 and 2020 seasons by $20 million in each year in calculating the milk price, according to the Commerce Commission's final report on the 2019 milk price.
The regulator said the extra costs relate "either to the failure to achieve efficiencies provided for in the 2015/16 setting of provisions for administrative and other overhead costs or to errors in the allocation process" in 2015/16 when the regulator was of the view that adjustments for the Velocity restructuring could be included as non-recurring items.
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"It appears that up to $20 million of the costs being reinstated relates to the original Velocity adjustments," the commission noted in a footnote in the final report.