Fonterra Suppliers Confident in Mainland Dairy Future
Fonterra's 460 milk suppliers in Australia, who will switch to Lactalis end of this month, are unfazed with the impending change.
The co-op is selling its stake in portions after failing to buy a buyer for the entire shareholding.
Subject to demand for the shares, under the Shenzhen Stock Exchange market rules it is only possible to sell up to 1% every 90 days directly on the exchange, or sell up to 2% in a single block every 90 days. Trades greater than 5% can be made to an individual party in an off-market transaction.
Fonterra chief executive Miles Hurrell says from here, “it’s about making pragmatic decisions to get the best outcome for the co-op from our holding in Beingmate.”
In 2015 the dairy giant invested $750 million in the infant formula firm, however, the investment failed to live up to expectations.In 2017 it wrote off the investment to the tune of $439m. Fonterra paid $3.92/share: based on current trading, the shares are worth only $1.08 each.
Fonterra also wound back its partnership with Beingmate: bringing distribution of its popular Anmum baby formula back in-house and ending the Australian joint venture involving its Darnum plant.
Fonterra still has a multi-year agreement with Beingmate to sell ingredients.
Hurrell says the decision to sell Beingmate shares is part of Fonterra’s three-point plan to turn around the business.
“One aspect of this plan was to take stock of our business. As part of this, we have re-evaluated every investment, major asset and partnership to ensure they still meet the cooperative’s needs today.
“This started with a strategic review of our relationship with Beingmate, which has been disappointing.”
Hurrell reiterated Fonterra’s commitment to the Chinese market.
“China will always be one of our most important markets. We’ve got a strong business there and are still very much focused on the areas in China where we can succeed.”
