on the block?
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.