What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The co-op says it has taken an impairment of $405 million on its 18.8% investment in the troubled Chinese baby food trader.
Chief executive Theo Spierings says the loss includes the Beingmate impairment and the $183m compensation it paid to Danone.
“As these are one-off events, our normalised net profit after tax of $248 million is a better reflection of our underlying operating performance for the half year,” he says.
Fonterra chairman John Wilson says the co-op’s greater China business continues to perform well overall; the review of the value of its Beingmate investment reflects “a fair value at this point in time”.
“While we appreciate the substantial opportunity and privilege of our business in China, our shareholders and unitholders will be rightfully disappointed with this outcome.
“Beingmate’s continued under-performance is unacceptable. The turnaround of the investment is a key priority for our senior management team.”
Wilson says the opportunity in the Chinese infant formula market remains, as does the potential for its Beingmate partnership – “but an immediate business transformation is needed for Beingmate to benefit from the ongoing changes in the market.”
Wilson says the board will decide how the Beingmate impairment and the Danone payment will be treated for final dividend purposes after the end of the financial year when it will have the full picture of Fonterra’s operating performance.
Given the possible impact of these decisions, the board is providing a forecast dividend range for the full-year of 25 – 35 cents per share, rather than just the earnings per share guidance normally given.
