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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