Fonterra remains confident as Chinese partner prepares for sale

Fonterra chairman John Wilson said last year it could take another one to two years before there's clarity on how its Chinese partner Beingmate will fare under new regulations

Fonterra says it retains confidence in its overall China strategy as its partner, Beingmate, prepares to announce a major asset sale in the next five days.

Shenzen Stock Exchange-listed Beingmate Infant & Child has suspended trading as it finalises the transaction, while Fonterra has indicated only very broadly what the sale is about.

In a statement, the co-operative says, “in keeping with listing regulations, while the details of the transaction are being finalised, Beingmate I&C Co. Ltd has applied to the Shenzhen Stock Exchange for a suspension of share trading. This also safeguards existing investor interests, in the event of any related share price fluctuations.

“Our partnership with Beingmate is a long-term, strategic investment to grow in the China infant formula market.  We remain confident in our overall integrated China strategy.”

Fonterra bought an 18.8% stake in Beingmate in March 2015, paying 18 yuan per share. That price fell to 11.97 yuan before the suspension.

Fonterra's China strategy involves $1.6 billion of total capital investment in farms in China and the Beingmate partnership. Chairman John Wilson said last November that was important to remember the investment in Beingmate is just one component of the partnership.

The co-operative has been forced to defend the partnership after the Chinese firm slashed its full-year guidance earlier this year, saying it now expected a net loss of 750-800 million yuan ($NZ150-160 million). This is double its earlier forecast and was a world away from the company’s 2015 net profit of 103.6 million yuan ($NZ20.65 million).

In December last year, chairman Fonterra chairman John Wilson called for patience as Chinese infant formula regulations shifted market conditions.

However, Fonterra claimed there had been a 78% uplift in sales of Fonterra's Anmum infant formula brand, a latecomer to the Chinese market, through Beingmate's distribution network, while production is starting to flow into Beingmate's consumer businesses from its joint venture Darnum plant in Australia following a long delay in getting regulatory approvals.


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12 Comments & Questions

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Wonder who Fonterra's China advisors are? Wonder if they are New Zealanders who have as much idea about the China market and dealing with China companies as Telecom, Air NZ, Tower, Fletcher Group and The Warehouse did about the Australian market and dealing with Australian companies?

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Most NZ business people believe in the theory of 'win win' and a good result for both parties. Therefore almost all struggle with the Chinese theory of we will take what ever we can now, and also take whatever we can later

There is nothing wrong with the Chinese way its just New Zealanders in the main are naive to it. As a result almost none (cant think of any) have ever succeeded in China.

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Generally agree, although equal carnage for most overseas expeditions for NZ companies.

Zuru Toys might be the exception to the rule.

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Maybe Fonterra would have been better off buying a stake in Zuru...they could have done a line of milk-filled balloons?

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Maybe they were naive and expected honesty in dealings etc.

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Extremely naive - enough water under the bridge over the decades to know that wolves of all nationalities lurk out there. Not least are the kiwi businessmen who hoodwinked others out of billions of dollars (Equiticorp, Finance Companies to name but a few).

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Yet another poor move by extremely well paid Executive management, lets see how their bonuses and pays are affected. Wouldn't hold my breath.

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Hopefully they are selling their insurance business whcih they recently started.

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An extension of NZ government aid program
Bar old investments made by NZ Dairy Board all have been train wrecks
Current analyst game is guessing size of write off?
Bet they have partners interests at heart - Tui Billboard

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"The Shenzen-listed Beingmate, in which Fonterra has invested about $754 million, recently reported further operating losses for the third quarter of 2016."

With the current share price languishing near 12 yuan for years on end, Fonterra are sitting on a very hefty 33% loss ($250M in the red). How much longer will shareholders have to wait, especially considering now that BeingMate are flogging off the family silver?

For shame...

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Could have invested in ATM and made billions. These Fonterra executives sure know how to pick the losing propositions!

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Could have invested in Mengniu at the time they invested in San Lu. Mengniu is a top 20 global dairy company formed in 1995. Turnover USD 2 Billion

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