Sharechat Logo

Fonterra criticises Beingmate after 'extremely disappointing' earnings downgrade

Monday 22nd January 2018

Text too small?

Fonterra Cooperative Group has criticised struggling infant formula producer and distributor Beingmate Baby & Child Food, which it uses to sell its Anmum formula in China, after the Chinese company cut its forecast earnings overnight.

Beingmate, of which Fonterra owns 18.8 percent, said its loss in calendar 2017 was between 800 million Chinese yuan and 1 billion yuan, or $171 million to $214 million, compared to a previous forecast loss of between 350 million yuan and 500 million yuan.

"We are extremely disappointed by this announcement and the ongoing performance of the company," Fonterra said in a statement. "We are seeking more information on the forecast downgrade in addition to receiving Beingmate’s full year financial statements. We will consider the financial implications on our investment for the purposes of our upcoming interim financial results."

In the 2017 financial year, New Zealand's biggest company recognised an impairment charge of $35 million on Beingmate, reducing the carrying value to $617 million, which it said reflected the Chinese firm's share price slide and recent losses. At the time, Fonterra said strong market fundamentals and regulatory changes that came in from this year were expected to improve Beingmate's financial performance.

Today, Fonterra said while the strategic rationale for its partnership stands, it is "disappointed that Beingmate is not maximising the opportunity created by the early registration of its 51 formulations under the new registration rules. The Chinese market is growing rapidly and within five years, forecast demand for infant and baby dairy products will be more than the total for other global markets, so the potential remains."

China was worth $3.4 billion to Fonterra in the 2017 financial year, and made a normalised earnings contribution of more than $200 million that year across four business areas - ingredients, consumer & foodservice, its China Farms dairying operations, and Beingmate.

Fonterra said it backed the judgement of its two designated Beingmate directors - Johan Priem and Christina Zhu. Four of Beingmate's directors, including Priem and Zhu, expressed concerns about the company's financial management and reporting, and Fonterra said it is seeking more information on that.

Units in the Fonterra Shareholders' Fund fell 0.5 percent to $6.49, and have gained 3.7 percent in the last 12 months.

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares rise as Skellerup posts record profit
NZ dollar gets lift from news Chinese delegation heading to US for trade talks
Skellerup best performing stock after annual result blows analysts out of the water
Tru-Test to sell businesses to Datamars for $147.9 million
Downer's NZ revenue jumps 59% as Hawkins makes full contribution
More ambition needed to lift productivity, home-building, Twyford says
UPDATE: Skellerup lifts annual profit 23% to a record; shares hit new high
Downer's NZ revenue jumps 59% as Hawkins makes full contribution
More ambition needed to lift productivity, home-building, Twyford says
Precinct Properties still backs Fletcher as Commercial Bay development pushed out

IRG See IRG research reports