Fonterra criticises Beingmate

Article – BusinessDesk

Jan. 22 (BusinessDesk) – Fonterra Cooperative Group has criticised struggling infant formula producer and distributor Beingmate Baby & Child Food, which it uses to sell its Anmum formula in China, after the Chinese company cut its forecast earnings …Fonterra criticises Beingmate after ‘extremely disappointing’ earnings downgrade

By Sophie Boot

Jan. 22 (BusinessDesk) – Fonterra Cooperative Group has criticised struggling infant formula producer and distributor Beingmate Baby & Child Food, which it uses to sell its Anmum formula in China, after the Chinese company cut its forecast earnings overnight.

Beingmate, of which Fonterra owns 18.8 percent, said its loss in calendar 2017 was between 800 million Chinese yuan and 1 billion yuan, or $171 million to $214 million, compared to a previous forecast loss of between 350 million yuan and 500 million yuan.

“We are extremely disappointed by this announcement and the ongoing performance of the company,” Fonterra said in a statement. “We are seeking more information on the forecast downgrade in addition to receiving Beingmate’s full year financial statements. We will consider the financial implications on our investment for the purposes of our upcoming interim financial results.”

In the 2017 financial year, New Zealand’s biggest company recognised an impairment charge of $35 million on Beingmate, reducing the carrying value to $617 million, which it said reflected the Chinese firm’s share price slide and recent losses. At the time, Fonterra said strong market fundamentals and regulatory changes that came in from this year were expected to improve Beingmate’s financial performance.

Today, Fonterra said while the strategic rationale for its partnership stands, it is “disappointed that Beingmate is not maximising the opportunity created by the early registration of its 51 formulations under the new registration rules. The Chinese market is growing rapidly and within five years, forecast demand for infant and baby dairy products will be more than the total for other global markets, so the potential remains.”

China was worth $3.4 billion to Fonterra in the 2017 financial year, and made a normalised earnings contribution of more than $200 million that year across four business areas – ingredients, consumer & foodservice, its China Farms dairying operations, and Beingmate.

Fonterra said it backed the judgement of its two designated Beingmate directors – Johan Priem and Christina Zhu. Four of Beingmate’s directors, including Priem and Zhu, expressed concerns about the company’s financial management and reporting, and Fonterra said it is seeking more information on that.

Units in the Fonterra Shareholders’ Fund fell 0.5 percent to $6.49, and have gained 3.7 percent in the last 12 months.

(BusinessDesk)

Content Sourced from scoop.co.nz
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