Fonterra is reporting a $348 million after-tax loss for its half-year result to January 31.
The co-operative’s 18.8% holding in Chinese investment partner Beingmate Baby & Child Food Co saw an impairment of $405 million after its value was re-assessed at $244 million.
Board chairman John Wilson says Beingmate’s “continued under-performance is unacceptable”.
“While we appreciate the substantial opportunity and privilege of our business in China, our shareholders and unitholders will be rightfully disappointed with this outcome.
“The turnaround of the investment is a key priority for our senior management team.
“The opportunity in the Chinese infant formula market remains, as does the potential for our Beingmate partnership – but an immediate business transformation is needed for Beingmate to benefit from the ongoing changes in the market,” Wilson says.
Fonterra’s $183 payment to French food giant Danone as a result of the whey protein concentrate contamination scandal in 2013 was also singled out for the loss.
Wilson says the board will decide how the the Beingmate impairment and the Danone payment will be treated for final dividend purposes after the end of the financial year.
Fonterra’s profit loss was down 36% from the previous year’s result. However, revenue was up 6% to $9.8 billion.
The-cooperative also announced its farmgate milk price to $6.55/kg of milk solids and an interim dividend of 10 cents per share to be paid in April.
Chief executive Theo Spierings says the company’s first half performance was as expected despite the “one off events” involving Beingmate and Danone.
“We knew going into this year we would have to carefully manage low starting inventory levels. This was followed by reduced New Zealand milk collections due to difficult weather conditions, further impacting our volumes available for sale.
“While our reported net profit after tax shows a loss of $348 million, it includes the payment to Danone and the Beingmate impairment. As these are one-off events, our normalised net profit after tax of $248 million is a better reflection of our underlying operating performance for the half year,” Spierings says.
