Two Major NZ Dairy Deals Completed
Two major acquisitions in the New Zealand dairy sector were completed this week.
Chief financial officer Marc Rivers says the three assets earmarked for sale would help hit the debt reduction target.
The co-op is also aiming to reduce its gearing ratio — the level of debt relative to debt plus equity — to 40-45% from its current level of 52.5%.
“We are well on target; those three asset sales would help us get debt and the gearing ratio down to targets we have set,” Rivers says.
Tip Top is one of three assets up for immediate sale; a final decision on its sale will be made before July 31.
Fonterra has already bought back the 51% stake in its Darnum plant in Victoria that it had sold to the Chinese company Beingmate.
The co-op is mulling the sale of its 19% stake in Beingmate, bought in 2014 for $750m but since written down by $405m due to the company’s poor performance.
And the co-op last week said it was selling its 50% stake in DFE Pharma, a joint venture set up in 2006 with the Dutch co-op FrieslandCampina. DFE Pharma is a large supplier of pharmaceutical excipients used as carrier agents in tablets and powder inhalers.
Rivers says DFE Pharma has been “a very successful business” for the co-op.
Sales in 2018 reached $346m; the JV achieved a gross profit of $100m.
DFE Pharma buys its high quality pharmaceutical grade lactose from Fonterra’s Kapuni plant; the arrangement will continue after the co-op exits the joint venture.
Fonterra chief executive Miles Hurrell says Fonterra has told FrieslandCampina that it has started a process to sell its 50% share of DFE Pharma.
“At the same time, we [are] maintaining our lactose service and supply agreements from Fonterra’s Kapuni operation in Taranaki and supporting the ongoing operations of the DFE Pharma business.
“Together with our partner, we have grown DFE Pharma from relatively small beginnings into a significant and successful business.
“While DFE continues to perform well, our ownership of it is not core to our strategy.”
