More pain for Beingmate as FMA eyes Fonterra’s books
Beingmate Baby & Child Food Co, part-owned by Fonterra, has reported another financial loss as the Kiwi dairy giant tries to sell its stake.
Fonterra is actively trying to sell down its 18.8 per cent shareholding after recording more than $430 million of write-downs and investment losses on the Shenzhen-listed business.
Yesterday, the Herald reported that the Financial Markets Authority was seeking information over concerns about Fonterra’s shock asset writedowns and financial statements, and alleged inconsistent valuation methods for the carrying values of Beingmate, and China Farms, another failed Fonterra investment.
Beingmate, a Chinese infant food manufacturer, reported a loss of 122.2 million yuan ($27m) for the six months to June 30, 2019 despite operating income rising 5.16 per cent to 1.296 billion yuan ($234m).
In its interim report just released the company pointed to the price of key raw materials such as lactoferrin and a competitive environment as influencing the loss.
Beingmate also mentioned the declining birthrate in China and the rate of exclusive breastfeeding as issues facing the company.
In March, Beingmate reported a net profit of 40.92 million yuan for the 2018 financial year, reversing consecutive losses in 2016 and 2017 of 780m yuan and 1.057b yuan respectively.
That prompted the local stock exchange to mark the company as ST (special treatment), which carries a delisting warning and restricted trading while the company was also under increased supervision due to concerns about its financial reporting.
The 2018 profit enabled the company to apply to the stock exchange to remove the delisting warning.
The latest loss comes as Fonterra looks to sell down its shareholding.
The co-operative last month said the decision was part of Fonterra’s three-point plan to turn around its business, however it had been unable to sell the block in one go.
“We have talked to a number of parties regarding the potential sale of our entire stake in Beingmate, but so far have been unsuccessful in finding a buyer,” chief executive Miles Hurrell said last month. Fonterra paid 18 yuan per share for its Beingmate shares for a total outlay of NZ$755 million as part of a joint venture partnership. It has since written down the carrying value to $204m after a string of heavy losses decimated Beingmate’s market value.
Beingmate shares last traded on the Shenzhen Stock Exchange at 5.41 yuan.
The Financial Markets Authority is seeking information over concerns about Fonterra’s 2019 year financial statements following a complaint from its largest farmer-shareholder, Colin Armer.
Armer, a former Fonterra director, claims there have been inconsistent valuation methods for the carrying values of Beingmate, and China Farms, which Fonterra has also written down in its accounts.
Armer has also asked the FMA to investigate Fonterra directors’ calculations on executive performance pay and why they were not independently audited.