Govt in dark on troubled distributor
Anxious farmers eager for information on Fonterra stake in Beingmate, says minister
Aagriculture griculture Minister Damien O’Connor said the Government is still in the dark over Fonterra’s investment in troubled infant formula producer and distributor, China’s Beingmate Baby and Child.
Late last month Beingmate issued a forecast earnings downgrade for its financial year ended December 31, revising the previously announced forecast loss of RMB350 million-RMB 500m to a forecast loss of RMB800mRMB1 billion ($171-$214m).
“We, like a number of concerned farmers, we have not been able to get access to all the information that might be useful,” O’Connor said after the official opening of French food giant Danone’s upgraded formula blending and processing plant at Mangere.
“Ultimately the farmers, as shareholders of the company, have to work through that process,” he said.
Beingmate has struggled to perform since Fonterra spent $755m on acquiring its stake in 2015, and analysts have long questioned whether the 18.8 per cent holding was big enough for Fonterra to influence the company’s direction.
The company’s shares, quoted on the Shenzen Stock Exchange, last traded at 5.2 yuan, down from Fonterra’s purchase price of 18 yuan.
Fonterra said last month that it was seeking more information on the ongoing performance of Beingmate but farmers have been in the dark since then.
The company said it would consider the financial implications of its investment in Beingmate for the purposes of its interim financial results scheduled for release on March 21.
China is one of Fonterra’s largest global markets, accounting for $3.4b of its annual sales revenue.
Danone said the Mangere plant upgrade cemented its New Zealand operation as a critical, strategic supply point for its local and regional markets and O’Connor said New Zealand could do with more like it.
“We need more plants like this, absolutely,” he told the Herald.
“We have got to really work hard to add value to every bit of milk powder that we make,” he said.
“You can’t do it overnight, but the more [nutritional] plants that we get, and many of them will be joint ventures — hopefully they are successful ones — so we have to be careful as we move forward,” he said.
In an oblique reference to Fonterra’s joint venture with Beingmate, O’Connor said: “They [joint ventures] have to share ultimate long-term goals and not be just quick fixes to meet growing challenges in the international marketplace.”
“Danone are big global players,” he said.
“They have a huge amount of technology and knowledge to bring back to the industry and hopefully our company, Fonterra, and other companies, can match that.”