Fonterra mulls block for Tip Top

Dairy giant Fonterra is considering the sale of its icecream brand Tip Top.

Chairman John Monaghan said it was looking at its ongoing ownership of Tip Top and had appointed FNZC as an external adviser to consider a range of options.

‘‘We want to see Tip Top remain a New Zealand-based business and this is being factored into our options,’’ Monaghan said.

‘‘While performing well, Tip Top is our only icecream business and has reached maturity as an investment for us. To take it to its next phase successfully will require a level of investment beyond what we are willing to make.’’

A ‘‘save Tip Top icecream’’ petition has already been launched in light of the announcement.

Fonterra chief executive Miles Hurrell said the key thing was to find a New Zealand buyer. ‘‘We understand the importance of this brand in a New Zealand context,’’ he said.

The Tip Top brand and a manufacturing plant in Mt Wellington, Auckland, would be included in the sale review.

Hurrell could not say how many staff worked at the plant but, if put up for sale, Tip Top would be sold as a going concern, he said.

‘‘It has a strong brand, a strong presence in New Zealand, so we see no impact on those manufacturing staff.’’

Very few Tip Top products were exported, he said.

If a sale went ahead Fonterra would want to keep supplying Tip Top with dairy ingredients, he said.

Fonterra chief financial officer Marc Rivers said the sale review was part of an overall portfolio review, designed to reduce its debt by $800 million.

‘‘It’s a great business and one that we’re very proud [of]. It’s done well.’’

Tip Top was first established in 1936 in Wellington and has been under Fonterra ownership since 2001.

It has had various owners over the years, including Western Australian company Peters and Brownes, which bought it in 1997.

It was then brought back into New Zealand ownership when Fonterra was formed in 2001.

Fonterra retaining part or full ownership were both options, Rivers said.

If a sale did go ahead it would be by the end of the fiscal year, which ends on July 31 for Fonterra.

The Tip Top announcement came as Fonterra posted a first-quarter gross margin that was down $14m on the same period last year.

The dairy giant posted a $646m gross margin on revenue of $3.8 billion, which was down 4 per cent.

Fonterra reports its profit results at half-year and full-year financial announcements only.

Rivers said gross margin ‘‘contributes to profit but it doesn’t go all the way down, so it’s sales minus cost of goods’’.