Fonterra’s spot of luck

In today’s Dominion Post:

The melamine in the milk scandal has had a silver lining for Fonterra in the form of a big jump in revenue from Asia.

In its half-year result, revenue from Asia, Africa and the Middle East was up 53 per cent to $1.2 billion. Chief executive Andrew Ferrier said increased ingredients sales to China was a major factor.

After the crisis became public in September, Chinese dairy companies started buying milk from overseas rather than sourcing it locally, he said.

That was the largest of three drivers of the increase in Asian revenues.

SanLu the Chinese dairy company that was 43 per cent owned by Fonterra was at the centre of the scandal, in which six babies died and more than 200,000 became ill.

The melamine crisis was also partly responsible for a switch to more expensive foreign dairy products by consumers in Asia, which enabled Fonterra to drive higher revenues, Mr Ferrier said.

Gains from the falling kiwi dollar was the third factor.

How can anyone report without a hint of outrage? So Fonterra’s sloppy, or possibly negligent, business practices in China kill or threaten the lives of many babies and the happy result is improved revenue for Fonterra.  That’s the invisible hand of the market handing out morality lessons for us all again I guess.

What have Fonterra got to hide?

Over at frogblog the commenter Skinman criticised Sue Kedgley for her media statement earlier this week suggesting Fonterra should publicly front with the minutes of the telephone meeting that Fonterra says confirm its Directors advised San Lu that there was no safe level of melamine contamination in milk.

Sue Kedgley’s statement followed former San Lu boss Tian Wenhua stating during her trial that a Fonterra board member had given her a document which stated that the European Union’s permitted levels of melamine were a maximum of 20mg to every kg of milk.

Skinman’s arguments were that there is a possibility that the release of the minutes could affect a possible appeal in China and that release could do further commercial harm to our biggest company in the midst of a global recession.

I made a brief response to Skinman on frogblog, but I think this issue needs some more discussion.

Yes, releasing the documentation could affect a possible appeal in China, but I can’t see what is wrong with that. If there is evidence of mitigating factors not presented at trial that could reduce Tian’s life sentence, then surely she should have the right to produce that evidence of those mitigating factors on appeal.

As for Skinman’s second argument, he seems to think that commercial viability should be paramount over transparency, accountability, and the right to justice. Unfortunately, that seems to be the way much of the corporate world thinks too – it’s that way of thinking that gives corporates reputations of the likes of James Hardie, Union Carbide and Dow Chemicals.

And, as far as commercial viability is concerned, Fonterra have nothing to fear if the minutes do, as Fonterra claims, refute Tian’s claim. Releasing the minutes will have an adverse commercial impact on Fonterra only if they fail to substantiate Fonterra’s claim that it told San Lu that there was zero tolerance for melamine in milk.

But we hear Fonterra Chairman Henry van der Hayden on Radio New Zealand refusing to release the documentation, stating:

We don’t need to do anything further; it’s actually a Chinese matter; it’s been a San Lu matter; it’s a Chinese law matter…

And the world, including the parents of the six babies who died from contaminated milk products, is supposed to just believe him! The more statements we hear like this from Fonterra, the more suspicion is raised that they actually do have something to hide.

If Fonterra won’t release the documents to verify their claim, then maybe we need a Commission of Inquiry to find out exactly what their role was in the contaminated milk scandal. Let’s get some emails rolling in to the Prime Minister asking for one.

Hat tip: The Sprout