AB Fonterra cuts milk payout
WELLINGTON Dairy giant Fonterra Co-Operative Group Limited downgraded its forecast milk payment to farmers and said it was looking to sell its ice cream business, as the New Zealandbased firm reels from its first ever financial loss.
The Auckland-headquartered company said in a statement yesterday that due to lower global dairy prices it had reduced its 2018-19 forecast farmgate milk payment to farmers to between NZ$6 to NZ$6.3 per kilogram of milk solids. That was down from a range of NZ$6.25 to NZ$6.50 set in October.
The revision underscored the dairy firms vulnerability to global commodity price gyrations, even as it made a concerted effort to move more of its production into value-added branded products.
Three months earlier the company announced its first ever annual financial loss, in part due to higher milk prices the previous year, which had shrunk its profit margins on its value-added products, such as branded cheese and yoghurt.
Analysts said that Fonterra was still under-estimating the likely dent to global dairy prices from increased supply in coming months.
We note the risks to Fonterras forecast are clearly tilted to the downside, said Nathan Penny, senior rural economist at ASB Bank, adding that its forecast range was around NZ$5.85 to NZ$6.15.
The 2018 financial year loss had prompted Fonterra to undertake a review of its assets, which the company said yesterday could lead to the sale of New Zealand icecream brand Tip Top.
Fonterra said it has appointed investment bank FNZC as an external adviser to consider ownership options for Tip Top, which it said has reached maturity and will require a level of investment beyond what we are willing to make.
Despite Tip Tops local popularity, Fonterra needed to free itself up to focus on selling branded products in bigger Asian markets where it is trying to capture demand for protein from the fastgrowing middle class, according to analysts.
They cant take it any further. It is logical to some extent...given the size of the company, and given the size of our dairy industry, they have to really focus on global markets, said Brian Gaynor, head of Auckland fund manager Milford Asset Management.
Fonterra also said it would regain full ownership of its Darnum plant in Australia by December 31, having on Wednesday agreed to shut down the Darnum joint venture with Chinese infant formula group Beingmate Baby & Child Food Co Ltd .
In 2015, Fonterra and Beingmate entered a joint venture to buy the Darnum plant, giving Fonterra a 49 per cent stake.
Since that time, Beingmate has struggled with widening net losses due to rising marketing costs, forcing Fonterra to this year announce a NZ$405 million (US$278.60 million) writedown on its 18.8 per cent stake in the Chinese firm.
Fonterra said it would enter into a multi-year agreement to supply ingredients to Beingmate from the plant.
Shares in Fonterras traded fund were largely flat yesterday at around NZ$4.7. REUTERS
The company has 1.1 billion euros (US$1.25 billion) in the super-senior loan, with Knighthead, VTB, Russias second largest bank, and Italys UniCredit among its debtors, he said.
Poletayev said that the super-senior debt would bear an annual rate of 10 per cent starting from January.
Replacing this loan with another one... is a task of the next couple of months. We are actively working on this and have received a couple of proposals, he said.
Sberbank and VTB, having lent a total of 1.1 billion euros and 300 million euros to Agrokor in the past, respectively, wont be taking part in any new loans for the company, he said.
Overall claims against Agrokor, from creditors including local banks, bondholders and suppliers, amounted to some 58 billion kuna ($8.9 billion) before the restructure.
Bondholders will own 25 per cent of Agrokor after the debt to equity swap.
Poletayev said that Sberbank is in talks with both western and eastern funds and banks, including from China and Arab countries, who may take part in the refinancing process. shop in 1976, expanded to a company with revenues amounting to 15 per cent of Croatias economic output, becoming a major part of ongoing efforts to integrate regional economies scarred by the wars of the 1990s.
Davis Morris, an ex-executive with Britains biggest food retailer Tesco, has joined Agrokor to oversee its retail business, Poletayev said.
Agrokor is facing an increasing competition in the region from the German rivals Lidl and Kaufland who have expanded during Agrokors recent troubles.
Fabris Perusko, a former McKinsey & Company consultant who was promoted to help with the restructuring from the board of Tisak, a chain of newsagents owned by Agrokor, is expected to be Agrokors CEO, Poletayev said.
Agrokors Mercator brand which includes 985 stores spread across Slovenia, Serbia, Bosnia and Herzegovina and Montenegro needs to reduce its debt, Poletayev said, putting it at 738 million euros in the January-September period.
Mercator will divest a number of non-core assets and sell real estate assets worth 116 million euros a deal already approved by its board of directors, Poletayev said.
Poletayev also said that Agrokors chain in Bosnia was not profitable enough and he believed the best option would be to redirect investments to Serbia, Croatia and Slovenia. REUTERS