A further step in Fonterra’s plan ‘to turn the business around’

Fonterra has announced its intention to sell a portion of its stake in Chinese company Beingmate Baby and Child Food Company Ltd.

The announcement was made this week, on Wednesday, August 7.

The company, which is one of the world’s largest dairy co-ops, is currently a shareholding of 18.8% of the business.

According to Fonterra’s chief executive, Miles Hurrell, this sale is part of Fonterra’s “three point plan to turn the business around”.

Earlier this year, Fonterra sold off its popular Tip-Top ice-cream brand to Froneri. This sale was also in line with its plan, with the aim being to reduce its debt by NZD$800 million by the end of the financial year.

Commenting on this sale, Miles said: “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 co-operative’s needs today.

It had carried out a strategic review of its relationship with Beingmate, which it admitted had been “disappointing”.

“The first action in this review was bringing the distribution of Anmum in China back in-house under our management.

“We then ended the Darnum joint venture with Beingmate, bought back Beingmate’s share of our Darnum facility in Australia and entered into a multi-year agreement for Beingmate to purchase ingredients from us.

“What remains is our shareholding in Beingmate Baby and Child Food company, which we now view as a financial investment only,” explained Miles.

It won’t happen fast

Although 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.

However, trades greater than 5% can be made to an individual party in an off-market transaction.

“From here, it’s about making pragmatic decisions to get the best outcome for the co-op from our holding in Beingmate.

“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,” Miles concluded.