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Fonterra and Nestle overhaul Latin American joint venture

Wednesday 28th May 2014

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Fonterra Cooperative Group and Nestle are overhauling their Latin American 50/50 joint venture, with the New Zealand dairy exporter getting the liquids business and the Swiss group buying the milk processing plants.

New Zealand's biggest company will take a 51 percent stake in Dairy Partners Americas Brazil, which will continue to commercialise chilled dairy products, while Fonterra and a local partner will take Nestlé's share of DPA Venezuela, Fonterra said in a statement. Fonterra will sell its share in the DPA milk powder manufacturing businesses and DPA Ecuador to Nestle, the world's biggest food group, and expects to receive $96 million in the next financial year.

"We've seen increased prosperity in markets like Brazil with rapid urban growth and a focus on healthy nutrition driving demand for dairy products," Fonterra managing director Latin America Alex Turnbull said. "A bigger stake in DPA Brazil means we will be well-placed to drive our volume and value growth strategy focusing on everyday nutrition offerings."

Fonterra, which is scheduled to update its forecast payout to farmer shareholders today, produces more than 900,000 metric tonnes of dairy products per year, with some $3.5 billion in revenue from consumer dairy, food service and dairy ingredients, it said.

The tweak to the decade-long agreement is subject to regulatory approval.

Units in the Fonterra Shareholders' Fund, which gives investors exposure to the group's dividends, rose 1.4 percent to $6 yesterday, and have gained 3.5 percent this year.

Swiss-listed Nestle's shares slipped 0.4 percent to 69.55 Swiss francs, and have advanced 7 percent this year.

BusinessDesk.co.nz

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