Tip Top

on the block?

The Southland Times - - Front Page - John An­thony john.an­[email protected]

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

Chair­man John Mon­aghan said the dairy gi­ant 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. 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 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.

‘‘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, and 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 es­tab­lished in 1936 in Welling­ton and has been owned by Fon­terra since 2001.

‘‘We want to see Tip Top re­main a New Zealand­based busi­ness and this is be­ing fac­tored into our op­tions.’’

Chair­man John Mon­aghan

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 op­tions, Rivers said. If a sale did go ahead it would be by the fis­cal year’s end, which is July 31 for Fon­terra.

The Tip Top an­nounce­ment came as Fon­terra posted a firstquar­ter gross mar­gin that was down $14m on the same pe­riod last year. The dairy co-op­er­a­tive 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’’. But it did not in­clude some other items that fea­tured in a half- or full-year profit and loss state­ment, such as other ex­penses, he said.

The co-op­er­a­tive also down­graded its 2018-19 fore­cast far­m­gate milk price range from $6.25 to $6.50 per kilo­gram of milk­solids to $6.00 to $6.30 per kg.

A 25-cent milk­solid price cut would cost the coun­try about $459m. For the av­er­age New Zealand farmer milk­ing 431 cows av­er­ag­ing 368kg milk­solids per cow it rep­re­sents a $39,652 blow.

It is the first fi­nan­cial per­for­mance up­date since the dairy co­op­er­a­tive posted its first ever ful­lyear loss of $196m in Septem­ber.

The Septem­ber loss was largely due to a $405m write-down of its in­vest­ment in Chi­nese com­pany Be­ing­mate and a dam­ages pay­ment of $183m to Danone fol­low­ing a court case in re­la­tion to the 2013 bot­u­lism scare.

Hur­rell said the co-op gen­er­ally makes a smaller pro­por­tion of its to­tal an­nual sales in the first quar­ter. This meant the re­sults ‘‘do not give much in­sight into the co-op’s ex­pected earn­ings per­for­mance for the full year’’.

‘‘It does, how­ever, put the spot­light on where we have chal­lenges that we need to ad­dress,’’ Hur­rell said.

Units in Fon­terra are trad­ing at about $4.71, a 26 per cent dis­count from where they were a year ago.


In­side Tip Top’s Auck­land fac­tory on its 70th an­niver­sary. The Tip Top ice­cream brand and its Mt Welling­ton plant will be in­cluded in the sale re­view, Fon­terra says.

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