Fonterra defends Chinese partner
Fonterra’s Chinese business partner Beingmate expects its loss for last year to be about double its previous forecast.
The Chinese infant formula company said it had forecast a loss of between $150.8 million and $160.9m in 2016, up from last year’s forecast of a loss of between $76.4m and $82.4m.
In 2015 Fonterra signed a deal to invest $700m in Beingmate for an 18.8 per cent stake in the company.
Beingmate attributed the increased loss forecast to the reversal of deferred tax assets, as well as to a provision for subsidiaries that had suffered losses.
Fonterra chief financial officer Lukas Paravicini said Beingmate’s performance reflected Chinese market conditions, which were challenging for all dairy players.
But he said the long-term outlook there was strong as disposable income grew and as China’s one-child policy was relaxed, and because of tightening brand regulations.
Euromonitor has forecast that sales of infant formula will jump from US$19 billion (NZ$26b) last year to more than US$50b by 2020.
Beingmate would announce its full results in March, Paravicini said, from which Fonterra would be able to assess the situation in more detail.
‘‘We are confident in our overall China strategy, of which our Beingmate partnership continues to be an important part,’’ Paravicini said. ‘‘Our partnership with Beingmate is a long-term investment to grow in the [Chinese] domestic infant formula market.’’
Paravicini said the Beingmate partnership supported sales of its NZMP brand from New Zealand, as well as whey products from Australia and Europe.
The distribution of its Anmum infant formula brand had grown from 60 cities in China in 2015 to more than 170 cities. ‘‘Our total sales are also ahead of projection.’’
Last July, Beingmate blamed a case of alleged milk powder tampering for its forecast loss of up to $48m for the first quarter of the financial year.