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

 

Fonterra's profit warning increases importance of asset sale

Fonterra's profit warning increases importance of asset sales - Fitch

By Rebecca Howard

May 24 (BusinessDesk) - Fonterra Co-operative Group's profit downgrade doesn't impact its rating but increases the importance of its asset sales, Fitch Ratings says.

Fonterra yesterday cited "heightened risks" in the fourth quarter to the co-op’s previous forecast normalised earnings and lowered its guidance to 10-15 cents per share from 15-25 cents. That implies a forecast range of $161.2-241.8 million, compared to $241.8-403 million.

Fitch - which had already revised its outlook to negative from stable when Fonterra cut its earnings forecast in February - said the latest downgrade will not immediately affect the rating.

But it says asset sales to reduce Fonterra's leverage over the next one to two years "have greater significance after the dairy co-operative announced a profit downgrade."

Fonterra yesterday said it was commencing a strategic review of its two wholly-owned farm-hubs in China and is reviewing options for the future ownership of its Dairy Partners Americas (DPA) Brazil joint venture, including a potential sale of respective stakes. It is also closing the Dennington factory in Australia.

The world's biggest dairy exporter is strengthening its balance sheet as part of its wider strategic review. That's included the divestment of a range of assets no longer deemed central to the cooperative's future, the most recent being the $380 million sale of the Tip Top ice-cream business.

Fitch said the lower profitability will add to pressure on the firm's ability to reduce its leverage but "we believe Fonterra's ongoing strategic review will take time and that challenges will arise throughout the process, and this has been incorporated in our negative outlook."

It said the latest actions "add to the raft of initiatives that Fonterra has announced to the market as part of its strategic review and continues to highlight the commitment the co-operative has to ensuring its investments and major assets support the group strategy."

Units in the Fonterra Shareholders' Fund and Fonterra's farmer-owned shares last traded at $4.22. Both are down 21 percent over the past 12 months.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 



BusinessNZ: Third Snapshot Report Reveals $9.5 Billion Business Investment In Climate Action

Signatories to the Climate Leaders Coalition have committed to invest $9.5 billion over the next five years to reduce emissions from their businesses, as revealed in their third anniversary snapshot report released today... More>>

Digitl: The home printer market is broken
Printers are more of a security blanket that a serious aid to productivity. Yet for many people they are not optional.
Even if you don’t feel the urge to squirt ink onto dead trees in order to express yourself, others will insist on printed documents... More>>


Serious Fraud Office: Commences Enquiries Into Allegations Of COVID-19 Wage Subsidy Fraud
The Serious Fraud Office has commenced a number of enquiries into alleged abuse of the Government’s COVID-19 Wage Subsidy. Director Julie Read said the allegations relate to multiple complex cases of potential fraud that have been referred to the agency following extensive investigations ... More>>

ComCom: Companies In Hot Water For Selling Unsafe Hot Water Bottles And Toys

A wholesaler and a retailer have been fined a total of $140,000 under the Fair Trading Act for selling hot water bottles and toys that did not comply with mandatory safety requirements. Paramount Merchandise Company Limited (Paramount) was fined $104,000 after pleading guilty in the Manukau District Court... More>>



Reserve Bank: Robust Balance Sheets Yield Faster Economic Recovery

Stronger balance sheets for households, businesses, financial institutions and the government going into the pandemic contributed towards maintaining a sound financial system and yielding a faster economic recovery than following previous deep recessions... More>>


Transpower: Releases Independent Report Into Events Of August 9
Transpower’s Chief Executive Alison Andrew has today released an independent report into the grid emergency of August 9 when insufficient generation was available to meet demand, leading to some customers being disconnected... More>>