Dairy Giant Fonterra Anticipating Major Loss In FY 2019

By Steve Wynne-Jones
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Dairy Giant Fonterra Anticipating Major Loss In FY 2019

New Zealand-based dairy giant Fonterra has said that it expects to report a loss of between NZ$590 million (€341 million) and NZ$675 million (€390 million) this year, as it seeks to streamline its operations.

The group's chief executive, Miles Hurrell, said that following a full review of the business over the past year, it has 'become clear that Fonterra needs to reduce the carrying value of several of its assets', as well as take account of other one-off accounting adjustments, which it said will total approximately NZ$820 million to NZ$860 million.

The group's full-year 2019 period ran until 31 July last.

Re-evaluating Assets

“Since September 2018 we’ve been re-evaluating all investments, major assets and partnerships to ensure they still meet the Co-operative’s needs," Hurrell said.

"We are leaving no stone unturned in the work to turn our performance around," he added. "We have taken a hard look at our end-to-end business, including selling and reviewing the future of a number of assets that are no longer core to our strategy."


The company added that the review process has identified a number of assets within the business that it believes are 'overvalued', based on their potential future returns.

In terms of the group's one-off accounting adjustments for the year, it said that its accounting valuation for its DPA Brazil business will be "impaired by approximately NZ$200 million", due to the economic challenges in Brazil.

Elsewhere, the closure and sale of is Venezuelan businesses has led to an accounting adjustment of around $135 million, while its China Farms business will be impaired by approximately NZ$200 million.

In its home market of New Zealand, its consumer business sees a writedown of around NZ$200 million, while its Australian business has seen a writedown of NZ$70 million.


'Tough But Necessary'

“These are tough but necessary decisions we need to make to reflect today’s realities," said Hurrell.

“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. Our cashflow remains strong, our debt has reduced and the underlying performance of the business for FY19 is in-line with our latest earnings guidance of 10-15 cents per share.

"We remain on track with our other targets relating to reducing capital expenditure and operating expenses.”

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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