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New Zealand dairy giant Fonterra posts loss on China writedown, CEO to go
[WELLINGTON] New Zealand dairy giant Fonterra slumped to a first-half loss Wednesday after massive write-downs on its China business, and announced long-time chief executive Theo Spierings' departure.
Fonterra posted a net loss of NZ$348 million (S$330 million) for the six months to January 31, down from a NZ$418 million profit in the same period a year earlier.
It blamed the downturn on a NZ$405 million writedown in the value of its stake in Chinese baby food firm Beingmate and costs arising from a 2013 contamination scare.
Fonterra was ordered late last year to pay Danone NZ$183 million in damages over the 2013 incident, when fears of contamination in Fonterra-supplied ingredients forced the French company into global baby formula recalls.
Chairman John Wilson acknowledged shareholders would be "rightfully disappointed" with some of the figures, but pointed to Fonterra's overall performance.
He said that when one-off costs were stripped out Fonterra recorded a net profit of NZ$248 million, down 36 per cent on the previous corresponding period.
Mr Wilson also said work was under way to improve the performance of Hangzhou-based Beingmate Group, which Fonterra bought in 2014 in the hope of tapping into burgeoning Chinese demand for baby formula.
"Beingmate's continued under-performance is unacceptable," he said, with the Chinese company struggling amid fierce competition.
"The opportunity in the Chinese infant formula market remains, as does the potential for our Beingmate partnership - but an immediate business transformation is needed for Beingmate."
Fonterra also announced Mr Spierings would leave later this year after seven years at the helm.
The cooperative's statement on his departure did not link it to the huge losses announced Wednesday, saying succession planning started in November.
"It is now time for a new CEO who can lead the cooperative through this next phase... it is also the right time for me personally. I look forward to new challenges," Mr Spierings said.
The Fonterra Shareholders' Fund, the listed arm of Fonterra, was steady at NZ$5.83 in early trading on the New Zealand stock exchange.