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Fonterra is selling its Farm Source livestock division to rural services company Carrfields, a move which forms part of a major financial review being carried out by the dairy co-op.
The review has been implemented after Fonterra posted a NZD 196 million ($128.5 million) loss for the 2018 financial year – its first annual loss since its inception in 2001.
Farm Source, with a network of 70 stores in New Zealand, was launched by Fonterra to provide support to farmers. It is expected that New Zealand-based Carrfields will take ownership of the livestock unit as of 1 March 2019.
Richard Allen, Farm Source stores director, said: “In the context of the review of the co-op’s assets and investments, we have made the decision to sell the livestock division to Carrfields Livestock. This will better serve the livestock team and the farms they service.
“While Farm Source’s livestock division has contributed positive returns since inception, we believe the investment required to maintain and grow this division can be more effectively targeted towards improving core areas of the Farm Source business.”
Craig Carr, Carrfields Group managing director, believes the acquisition is a strategic opportunity for Carrfields Livestock to fill gaps in its current national network.
“This acquisition will take the Carrfields Livestock team to over 150 plus livestock agents spread right across the country,” he said. “This strategic partnership will offer Farm Source clients and Fonterra farmer owners access to a nationwide agent and sale yard network provided by a New Zealand family-owned business.”
Fonterra’s strategic review has been implemented after it saw its revenue from the sale of goods decrease 5.9% to NZD 19.23 billion ($12.61 billion) for the year ended 31 July 2018.
The poor figures were affected by a legal settlement with Danone after a false botulism scare in 2013 and a NZD 439 million ($287.7 million) writedown on Fonterra’s investment in Chinese infant formula maker Beingmate. Last month, Fonterra reached an agreement with Beingmate to unwind their joint venture in Darnum, Australia.
In a move to reduce its debt levels by NZD 800 million ($550.1 million) by the end of the financial year, Fonterra said it is considering the sale of its New Zealand ice cream brand Tip Top.
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