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

 

Fonterra pressed to provide details on Beingmate investment


Fonterra pressed to provide 'more fulsome' details on Beingmate investment

By Pattrick Smellie

Sept. 12 (BusinessDesk) - Fonterra Cooperative Group owes holders in its Fonterra Shareholders Fund units a "more fulsome" update on Beingmate, the struggling Chinese infant formula producer and distributor that Fonterra uses to push its leading Anmum formula into the Chinese market, according to an analyst.

In a note to investors dated Sept. 7, First New Zealand Capital's head of institutional research, Arie Dekker, identifies the lack of transparency about Fonterra's 18.8 percent shareholding in Beingmate as a confidence as well as a performance issue for investors.

“We view the investment as a material one from both a financial and confidence perspective. We think the time is right for FSF to provide a more fulsome disclosure on what has happened with Beingmate and the reasons why it remains confident in the long term future.”

A Fonterra spokesman confirmed that there would be an update on Beingmate in the cooperative's Sept. 25 earnings announcements.

FNZC values the Fonterra stake in Beingmate at approximately $420 million, down around 45 percent on its March 15 purchase price of around $756 million, reflecting a range of problems at Beingmate, which included the firm declaring a $78 million loss for the most recent half-year, having previously given guidance for a $10 million profit for the period.

Beingmate shares, which are listed on the Shenzhen stock exchange, fell 10 percent earlier this month after the result and immediately following their release from a trading halt triggered by the company negotiating to sell two assets to its controlling shareholder for around $40 million.

In particular, FNZC wants details on Chinese market distribution of Anmum products, which Fonterra passed over entirely to Beingmate.

"Forecast annual sales growth was expected to exceed $100 million per annum by 2018," wrote Dekker. "FSF has not reported directly on progress with Anmum in China but we understand sales growth has been positive off a low base and more specific visibility on what has been achieved for Anmum in China has not been provided to date."

Dekker's latest critique follows a wider analysis in July of Fonterra's global strategy, in which he questioned whether capital currently applied to gaining access to 'milk pools' in other countries, including China and Australia, was delivering returns superior to investing in higher value dairy products from its New Zealand production base.

“Beingmate has been struggling financially over the last few years and it is not inconceivable that this has had a negative impact on distribution of Anmum against expectations on the volumes” being produced at the jointly owned Darnum milk processing plant in Victoria, Australia.

“In short, Beingmate has lost sales, missed FSF targets and likely lost reasonable market share in the last three years and FSF has been largely silent on it with investors,” FNZC says. “

“We do view Beingmate as a reasonably material investment for FSF (including for sentiment) and there are reasonable questions on its value in FSF’s books and how the market should look at the investment.

FNZC is maintaining a neutral rating on FSF units and a target price of $6.09. The units closed at $6.14 yesterday and have risen 9.6 percent over the last year.

FNZC risks to that view are the pending outcome of the Danone litigation, relating to the 2013 whey protein concentrate contamination scare, which was one of the catalysts for the Beingmate play in 2014 after Danone stopped using Fonterra’s Darnum facility. Beingmate picked up a 50 percent interest in the Darnum plant in a joint venture with Fonterra.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 




Civil Contractors: Massive Rebound In Civil Construction Business Confidence

New Zealand’s civil construction industry is riding a massive rebound in post-pandemic business confidence – but this may be undermined by skills shortages, which continue to be the industry’s number one challenge... More>>



Energy: Feeling Our Way Towards Hydrogen - Tina Schirr

Right now hydrogen is getting a lot of attention. Many countries are focusing on producing hydrogen for fuel, or procuring it, or planning for its future use... More>>

Maritime Union: Calls For New Zealand Shipping To Resolve Supply Chain Crisis

The Maritime Union says there needs to be innovative responses to ongoing shipping congestion. Maritime Union of New Zealand National Secretary Craig Harrison says it is essential that New Zealand develops its own shipping capacity... More>>


Housing: New Home Consents Continue To Break Records

A record 44,299 new homes were consented in the year ended June 2021, Stats NZ said today. “The annual number of new homes consented rose again in the June 2021 year, the fourth consecutive month of rises,” construction statistics manager Michael Heslop said... More>>


Real Estate: June Home Transfers Remain High
There were 44,517 home transfers in the June 2021 quarter, the highest June quarter figure since 2016, Stats NZ said today. The number of home transfers was very similar to the March 2021 quarter and was up 18,252 from the June 2020 quarter... More>>



Statistics: Household Saving Falls In The March 2021 Quarter

Saving by New Zealanders in the March 2021 quarter fell to its lowest level in two years after rising sharply in 2020, Stats NZ said today. Increases in household spending outpaced income growth, leading to a decline in household saving from the elevated levels that prevailed throughout 2020... More>>

ALSO: