Powder keg hits Fonterra partner

Fonterra’s Chinese business partner Beingmate has been financially damaged by a case of alleged milk powder tampering, causing it to forecast a loss of up to $48 million for the first quarter of the financial year.

Previously Beingmate had predicted a $21m profit, but in its latest forecast it said that due to ‘‘fake infant formulas’’ it had revised this to a loss of between $44.5m-$48m.

In March last year Fonterra signed off on a deal to invest $700m for an 18.8 per cent stake in the company.

As yet the only Fonterra infant formula sold through Beingmate is its Anmum infant formula, manufactured in New Zealand.

But the dairy giant is finalising product trials and is in the final stages of regulatory approvals with the Australian and Chinese governments to manufacture formula at its Darnum plant in Victoria, Australia.

Fonterra said it remained confident about the partnership, which was ‘‘part of its long term business in China’’.

Chief financial officer Lukas Paravicini described the Beingmate forecast as ‘‘a responsible signal to the market. We will wait to see their detailed half-year results.

‘‘We continue to see good growth in our Anmum sales in China. The infant formula market in China remains strong and in the last 12 months to May, infant formula sales were up 47 per cent compared to the same period last year,’’ Paravicini said.

The Shanghai Daily reported that an authorised Beingmate infant formula dealer had been linked to a ring that bought cheaper powder and repackaged it to be more expensive.

In September last year police found more than 20,000 empty containers of the Beingmate and Abbot Laboratories brands and 65,000 sets of labelling materials. The dealer bought a cheaper variety of Beingmate baby formula and then repackaged it.

The products were safe and met national standards.

Federated Farmers dairy chairman Andrew Hoggard said it was not good news.

’’Miracles don’t happen overnight but we don’t want to see red ink. I’ll be basing my opinion on what is happening when the formula is being sold,’’ Hoggard said.