Fonterra puts SAP project on ice

A source says the company had to get its capital spending down

Dairy giant Fonterra has put on hold a major IT project, citing more pressing business priorities.

For the past two years, the company has been planning to standardise its disparate manufacturing systems on SAP. It was expected to make a decision this month on the successful tenderer.

A spokesman says the work will now be picked up at a later date. He won’t name the short-listed companies but Computerworld understands they include IBM and Accenture. “We don’t discuss vendors,” he says.

An industry source close to the project suggests it would have cost each integrator in the vicinity of $2 million to get to this stage.

Another source says the project was postponed by Fonterra’s leadership team because the company’s debt ratios were too high.

“It had to get its capital spending down,” the source says.

The Fonterra spokesman says the decision to delay had nothing to do with debt ratios.

“There were other business priorities,” he says.

Following farmer shareholder pressure earlier this year, Fonterra has announced that in the future it plans to pay separately the value-added part of its milk payments, rather than bundle it in with the rest of the payout, mostly for commodity milk. The company says most farmers will see a “slightly positive effect” on cashflow.

Chief financial officer Guy Cowan was quoted last month as saying the value-added contribution would almost double this season.

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