Fonterra predicts record loss for 2019 after series of write-downs
August 13, 2019
Fonterra has said it is on track to record an annual loss of as much as NZD 675 million ($435.2 million) due to a range of write-downs across its global business.
The dairy co-operative posted a loss of NZD 196 million for the year ended July 2018 – its first annual loss since its inception in 2001.
Following a review that began last year, Fonterra said it now needs to reduce the carrying value of several of its assets and take account of other one-off accounting adjustments, which total between approximately NZD 820 million and NZD 860 million.
Fonterra CEO Miles Hurrell said: “Since September 2018, we’ve been re-evaluating all investments, major assets and partnerships to ensure they still meet the co-operative’s needs. We are leaving no stone unturned in the work to turn our performance around.
“We have taken a hard look at our end-to-end business, including selling and reviewing the future of a number of assets that are no longer core to our strategy. The review process has also identified a small number of assets that we believe are overvalued, based on the outlook for their expected future returns.”
The co-operative has impaired its accounting valuation for DPA Brazil by approximately NZD 200 million, mainly due to economic conditions in Brazil.
The previously announced sale of its Venezuelan consumer business and the closing of its ingredients unit in the country has involved a NZD 135 million accounting adjustment.
Meanwhile, the carrying value of China Farms will be impaired by approximately NZD 200 million due to the slower than expected operating performance.
Fonterra’s New Zealand consumer business has been written down by NZD 200 million and, finally, the firm took a NZD 70 million hit on the value of its ingredients business in Australia.
The co-operative has also announced it will not pay a dividend this year as it aims to reduce debt.
The announcements come a week after Fonterra announced its intention to sell a portion of its 18.8% stake in Chinese infant formula manufacturer Beingmate.
Since posting a loss last year, the co-operative has sold its Tip Top ice cream business and Farm Source livestock division and reached an agreement with Beingmate to unwind their joint venture in Darnum, Australia.
Source: Food Bev Media