Fonterra sells out of British joint venture, looks to the east
Fonterra has sold its 25% share in a UK joint venture to the majority owner, Danish dairy giant Arla Foods.
The joint venture, AFF, was established in 2002 to market block butter, spreads and aerosol cream products in the UK.
Fonterra chief financial officer Jonathan Mason said the joint venture had been successful.
However, he said the investment was no longer core to the company’s long-term strategy, which is focused on growing value add ingredient sales and on regional consumer businesses in Asia, Australia/New Zealand and Latin America.
Mr Mason said Fonterra would continue to license the Anchor brand to Arla and supply New Zealand butter.
The transaction value was not disclosed.
AFF made a contribution of $30 million before tax to Fonterra shareholders in 2006/2007, up from $20 million in the 2005/2006 season.
Fonterra's annual report placed the carrying value of AFF at $67 million and its contribution to shareholders at $28 million.
Back to home
Back to top
Print
Email
Share
Delicious
Digg
StumbleUpon
Reddit
Google
Yahoo
Technorati
Scoopit
NBR SERVICES
SUBSCRIPTIONS
Sign up for NBR subscriber content or email alerts
Latest
Comments and questions7
So much for being a value added player and saivvy investor.
Fonterra no more than ever are showing the boring commodity philosophy.
Profits jump by 50 percent from one season to the next and Fonterra sells? What the... happened?
Don't so be naive. The 50% increase in profitability and the extent to which the higher profit level is likely to continue in future years will have been factored into the AFF sale price.
Also, selling AFF does not mean more boring commodities. The funds raised from the sale of AFF will undoubtedly be used to expand value add activities elsewhere.
Now that Fonterra are changing their structure I expect the Chinese will own most of it in 10 years...
The UK is a mature dairy market sitting behind the iron curtain of the CAP. That Fonterra sees other markets as more important and wants to concentrate on growing markets in particular, including ones which have serious value-added growth potential, shows that they're thinking ahead and showing some strategic foresight. So don't beat them up for it.
And no, I doubt the Chinese will own them within ten years.
for the canadian.
This short term sell out is a fools mistake. The whole idea of downstream (yep) is to get more of the profit for farmers. But a return of 30 million on an asset of 67 million is not enough.
Fonterra must be REALLY desperate for cash to sell it. I hope they got 200mil plus else they have been robbed.
The Sanlu debacle showed that they have plenty of appetite to throw away money in China. Perhaps they are preparing to do it again.
Post new comment or question
To share this article, click on a service below