ZCZC
BCN-03
NZEALAND-FOOD-AGRICULTURE-EARNINGS-FONTERRA
Write-downs hit New Zealand dairy giant Fonterra
WELLINGTON, Aug 12, 2019 (BSS/AFP) – New Zealand dairy giant Fonterra announced more than NZ$820 million ($530 million) in write-downs Monday, a financial hit that will plunge it deep into the red and prevent an annual dividend payout.
Fonterra — the world’s largest dairy exporter — said a review of operations had found assets were collectively over-valued by NZ$820-860 million.
It said the one-off costs meant the co-operative would post a rare loss of NZ$590-675 million when it unveils its annual results next month.
Chairman John Monaghan said Fonterra would not pay an annual dividend to shareholders as it was “in the best long-term interests of the co-op” to reduce debt.
The upcoming loss will be only the second in the 18-year history of Fonterra, a collective that buys milk and dairy products from New Zealand farmers then sells them on to foreign firms.
It follows a troubled few years which has seen a slew of top executives depart as Fonterra slashed the value of investments in China and struggled to contain the fallout from a 2013 baby formula contamination scare.
“These are tough but necessary decisions we need to make to reflect today’s realities,” chief executive Miles Hurrell said of the write-downs. “We’re in no doubt that farmers and unit holders will be rightly frustrated by these write-downs. I want to reassure them that they do not, in any way, impact our ability to continue to operate.”
Fonterra said the latest write-downs were focused on four areas — operations in Brazil, customer business in New Zealand, farms in China and Australian ingredients.
Monaghan insisted Fonterra remained in good shape and was on track to turn the business around.
“Our co-op remains strong at its core — over the last 12 months we have improved our cashflow, reduced our debt and removed significant cost from within the business,” he said.
“But there is still more to do. The business units that are at the heart of our new strategy are delivering for us.”
The announcement sent shares in Fonterra falling 4.5 percent to NZ$3.59 on the New Zealand stock exchange.
BSS/AFP/PSB/1115 HRS