INDEPENDENT NEWS

Fonterra Sells China Farms

Published: Mon 5 Oct 2020 08:39 AM
Fonterra has agreed to sell its China farms for a total of $555 million (RMB 2.5 billion*1), after successfully developing the farms alongside local partners.
Inner Mongolia Natural Dairy Co., Ltd, a subsidiary of China Youran Dairy Group Limited (Youran), has agreed to purchase Fonterra’s two farming-hubs in Ying and Yutian for $513 million (RMB 2.31 billion*1).
Separately, Fonterra has agreed to sell its 85 per cent interest in its Hangu farm to Beijing Sanyuan Venture Capital Co., Ltd. (Sanyuan), for $42 million (RMB 190 million*1). Sanyuan has a 15 per cent minority shareholding in the farm and exercised their right of first refusal to purchase Fonterra’s interest.
CEO Miles Hurrell says in building the farms, Fonterra has demonstrated its commitment to the development of the Chinese dairy industry.
“We’ve worked closely with local players, sharing our expertise in farming techniques and animal husbandry, and contributed to the growth of the industry.
“We don’t shy away from the fact that establishing farms from scratch in China has been challenging, but our team has successfully developed productive model farms, supplying high quality fresh milk to the local consumer market. It’s now time to pass the baton to Youran and Sanyuan to continue the development of these farms.”
Mr Hurrell says the sale of the farms will allow the Co-op to prioritise the areas of its business where it has competitive advantages.
“For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the needs of the Co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk.
“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production. Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China.
“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R and application centres in China will support this direction,” says Mr Hurrell.
Completion of the sale, which is subject to anti-trust clearance and other regulatory approvals in China, is expected to occur within this financial year.
As previously announced, through the sale process and strategic review of our China Farms we gained additional information and further insights and, as a result, revised down the valuation of these assets.
The transaction value is subject to customary purchase price adjustments, and exchange rate movements. Any gains or losses on the sale would be normalised upon completion of the sale*2.
Fonterra expects to use the cash proceeds from the two transactions to pay down debt, as part of its previously announced overall debt reduction programme.
*1 Based on an RMB to NZD conversion rate of 4.5
*2 The announced forecast earnings will continue to reflect only the underlying performance of the business.

Next in Business, Science, and Tech

Largest Drop In Terms Of Trade In A Decade As Dairy Export Prices Sour
By: Statistics New Zealand
Election Boosts October Job Numbers
By: Statistics New Zealand
New Year Border Exception For Seasonal Workers In The Horticulture And Wine Industries
By: New Zealand Government
Discovery, Inc. Completes Acquisition Of New Zealand’s Mediaworks TV Ltd
By: Discovery
Big Year Underway At Albatross Colony
By: Department of Conservation
ASB Survey Reveals Majority Of Kiwis Expect House Prices To Keep Climbing
By: ASB
Births And Deaths: Year Ended September 2020
By: Statistics New Zealand
NZ Economy Holding Up Well Amongst The Developed World, Forecast To Finish The Year Down 3% On 2019
By: ASB
Govt Goes “hard And Early” On RSE Workers
By: ACT New Zealand
Bringing RSE Workers Back The Right Move
By: Business NZ
Cream Of The Crop Will Get To Market
By: Auckland Business Chamber
Horticulture Industry Appreciates Government’s Decision On RSE Workers
By: Horticulture NZ
Skyrocketing house prices: Economist says Reserve Bank, govt, trying to address pandemic
By: RNZ
NZ Govt Considers Making House Prices Part Of RBNZ Mandate
By: XE Money Transfer
Māori Population Estimates: At 30 June 2020
By: Statistics New Zealand
View as: DESKTOP | MOBILE © Scoop Media