Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Fitch Assigns Ratings Fonterra At ¡¥AA-/F1+¡¦

Fitch Assigns Ratings To New Zealand¡¦s Fonterra Co-Operative Group Limited At ¡¥AA-/F1+¡¦

Fitch¡VBrisbane/Hong Kong/London¡V16 April 2002: Fitch Ratings, the international ratings agency, has assigned a foreign currency Long-term rating of ¡¥AA-¡¦ (AA minus) and a Short-term of ¡¥F1+¡¦ to Fonterra Co-operative Group Limited (¡§Fonterra¡¨).

Also assigned are ratings of ¡¥AA-¡¦ to unsubordinated notes issued under Fonterra¡¦s USD2.0 billion Euro Medium Term Note programme (EMTN) and of ¡¥A+¡¦ to any subordinated notes issued under that programme. Finally, an ¡¥F1+¡¦ rating is assigned to Fonterra¡¦s USD1.5bn Euro Commercial Paper (ECP) programme and USD1.5bn USCP programme. The Long-term rating Outlook is Stable.

Fonterra¡¦s ratings reflect its position as a near-monopsony for New Zealand¡¦s milk production (about 98% of the country¡¦s dairy farmers are Fonterra co-operative members) and as a near-monopoly for the country¡¦s dairy exports. The ratings also acknowledge Fonterra¡¦s diverse range of dairy products; its geographically diverse export markets; and the New Zealand dairy industry¡¦s position as the least-cost producer in the world. High barriers to entry in the industry exist within New Zealand and Fonterra is of prime importance to the country¡¦s economy, representing 7% of GDP and 20% of foreign currency earnings.

Fonterra¡¦s ratings also reflect a solid financial profile, underpinned by the contractual subordination of up to one-third of milk supply payments to its shareholder farmers. Representing around 53% of Fonterra¡¦s cost base, milk supply costs are paid by instalment, with Fonterra retaining the contractual right to withhold up to one third of the amount due in order to ensure it has the capacity to meet debt service commitments and obligations to other creditors.

Risks to Fonterra¡¦s rating include:
„h any loss of milk supply arising from weather or disease or natural catastrophe;
„h any competitor establishing significant processing capacity;
„h any widespread shift from dairy farming to next-best land use;
„h any integration problems that may result from the recent merger (see below);
„h and the limitation on access to equity capital markets imposed by the co-operative structure.

However, the rating Outlook is Stable as Fitch does not envisage these risks crystallising in the medium term.

Fitch will monitor closely the extent of Fonterra¡¦s future investment in unconsolidated entities; the future balance between those operations that benefit from the cost pass-through mechanism and those that do not; and any signs that competitors might set up substantial milk processing capacity to threaten Fonterra¡¦s near-monopsony for New Zealand¡¦s raw milk.

Fonterra is New Zealand¡¦s largest company and one of the world¡¦s leading producers and exporters of dairy products. It was formed through the merger of three domestic entities in October 2001. Fonterra¡¦s 14,000 members (dairy farmers who are shareholders in the co-operative) supply around 12 billion litres of milk per annum for processing. Fonterra has a unified and vertically integrated production and export marketing structure that spans 140 countries. It is the largest individual player on the international dairy market, accounting for about 30% of all products traded there. The Cooperative¡¦s assets exceed NZD12bn and revenues are more than NZD14bn per annum.

A full research report will be available on the agency¡¦s web site,


© Scoop Media

Business Headlines | Sci-Tech Headlines


Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>


Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>


Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>


Half A Billion Accounts, Including Xtra: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>


Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news