Fonterra to pay $183m damages
French company Danone has been awarded damages of $183 million from Fonterra after its precautionary recall of whey protein in August 2013.
Fonterra has lowered its forecast earnings per share range for the 2017-18 financial year to between 35 cents and 45c, down from 45c to 55c, after assessing the financial implications of the decision.
Federated Farmers vice-president Andrew Hoggard said, speaking as a Fonterra shareholder, the decision to cut the dividend made him feel ‘‘pretty pissed off’’.
‘‘Most farmers will be a little miffed. Farmers own the company so the buck stops with us, but I tell you what, if next year, all the senior managers get big fat bonuses I will be exceptionally effed off.
‘‘At the end of the day, bonuses are paid for going above and beyond and obviously we didn’t go above and beyond that year and we have to pay for it.’’
Fonterra chairman John Wilson also expressed his ‘‘anger and disappointment’’ at the decision of a Singapore arbitration tribunal.
‘‘I was angrier in 2013 when I found out about the false test,’’ he told a press conference yesterday afternoon.
Chief executive Theo Spierings said despite the case, Fonterra wanted to renew its commercial relationship with Danone.
He said the co-operative thought it had been covered by an $11m limitation of liability. ‘‘It’s a precedent making decision’’ that other companies would be watching, he told the press conference.
Both expressed a hope that there would be no further court action, either from Danone or the other seven companies which Fonterra supplied at the time of the incident.
Fonterra had come to an agreed settlement with the other seven within several months of the scare.
The co-operative’s lawyers would continue to ‘‘pore over’’ the 302-page decision, but recognised there were few options for challenging it.
Earlier yesterday, Fonterra requested an immediate trading halt on the Australasian stockmarkets as it mulled over the outcome of its arbitration with Danone, which was seeking $980m from Fonterra as a result of a botulism scare. However, Spierings indicated Fonterra never knew the exact extent of the claim Danone was making.
In a statement, Danone said it welcomed the Singaporean court’s decision ‘‘as a guarantee that the lessons from the crisis will not be forgotten’’.
‘‘Danone considers that this arbitration underscores the merit of its legal actions against Fonterra, including to champion the highest standards of food safety across the industry,’’ it said.
Spierings said Fonterra was able to meet the recall costs.
The decision has no impact on the forecasted milk price.
The arbitration followed events in 2013 when Fonterra issued a precautionary recall of its WPC80 ingredient and products containing WPC80. It was later confirmed that there had been no food safety risk to the public.
Fonterra and the Government held reviews after the recall. An independent inquiry commissioned by Fonterra confirmed its management acted in the best interests of its consumers.
‘‘The decision to invoke a precautionary recall was based on technical information obtained from a third party, which later turned out to be incorrect,’’ Spierings said.
‘‘While there was never any risk to the public, we have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems.’’
Danone reported revenue for 2014 of $252m, down from $318m in 2013, with expenses of $13m, twice that of the previous year.
The French company and Fonterra fell out over the botulism scare, with Danone taking two cases to court. One, seeking damages of $980m, was to be decided by arbitration in Singapore.
The other was for $545m, the amount Danone says that the botulism incident cost it when it had to recall 67,000 cans of its Karicare brand.