World’s biggest milk exporter hurt by turmoil in Venezuela and China’s slowdown

14-Aug-2019 Intellasia | CNN | 6:02 AM Print This Post

The world’s largest dairy exporter says it expects to lose nearly half a billion dollars this year, and won’t pay its shareholders a dividend.

Fonterra, which is based in New Zealand, attributed the anticipated record loss to problems with its overseas business.

The company said it needs to write down the value of of assets in Brazil, China, New Zealand, Australia and Venezuela. Fonterra sold its consumer business in Venezuela, while growth in other markets has been slower than expected.

“These are tough but necessary decisions we need to make to reflect today’s realities,” CEO Miles Hurrell said in a statement.

Fonterra said it expects to report a loss of as much as $436 million in the latest financial year, which just ended. The company will report its annual results next month.

Fonterra shares sank 5.1 percent in New Zealand on Monday.

The company attributed its struggles in overseas markets to a wide range of problems. Economic conditions in Brazil are hurting sales volumes and prices, while Fonterra’s Australian business has been hit by drought, reduced milk supplies and industry competition. Business in China and New Zealand also hasn’t been as strong as the company expected.

“We’re in no doubt that farmers and unit holders will be rightly frustrated by these write-downs,” Hurrell said. “I want to reassure them that they do not, in any way, impact our ability to continue to operate.”

The anticipated annual loss will be the second in a row for Fonterra. Last year, the company had to write down its investment in Beingmate, a large infant formula maker in China, after it had “not gone the way we expected.”

Fonterra bought a nearly 19 percent stake in that company four years ago. At the time, that stake was valued at roughly $490 million. The company announced last week that it plans to sell part of that stake, and even said it has been in talks to potentially sell all of it though the company has so far been unable to find a buyer.

Monaghan said the company remains strong at its core, adding that its cash flow has improved, and its businesses costs and debt have been reduced.


Category: China

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