Fonterra maintains ratings

Fonterra has kept its S&P Global Ratings intact following the decision to award damages of $183 million to French company Danone.

The Melbourne-based agency said the dairy giant had ample liquidity to cover the payment and it believed Fonterra had appropriately addressed its food safety monitoring processes.

Earlier this month a Singaporean tribunal ordered Fonterra to pay compensation to Danone for losses suffered after product had to be recalled following a botulism scare in 2013. The decision has no impact on the company’s forecast milk price.

S&P said the ratings and outlook on the dairy giant remained A-/Stable/A-2. Farmers are not happy with the effect of the damages, which has been to reduce the earnings per share range to between 35 and 45c, down from 45 and 55c. S&P said in addition, it expected dividends to reduce by a commensurate amount.

‘‘We estimate the net impact will increase our adjusted debt-toEBITDA [earnings before interest, taxes and depreciation] calculation by about 0.1 times. The stable rating outlook reflects our expectation that Fonterra will maintain adjusted debt to EBITDA at the lower end of the 3x-4x range. We view the payment to Danone as non-operating and non-recurring and therefore adjust our EBITDA calculation accordingly. To this end, the payment will only negatively affect our net debt calculation,’’ S&P said in a statement.

Forsyth Barr analyst James Bascand said the rating was no surprise. ‘‘If you look at the impact the damages has on Fonterra’s balance sheet it is relatively immaterial, given how large the company is.