NEW ZEALAND – Fonterra has completed the sale of its 50% stake in the joint venture company it formed with Royal FrieslandCampina, DFE Pharma to CVC Strategic Opportunities II for NZD554 million (US$361.83m).
The company said that the cash proceeds of NZD554 million, comprising of the original sale proceeds of NZD537 million and NZD17 million in settlement adjustments, will is be a strong boost in strengthening the dairy Co-op’s balance sheet.
The deal was announced in September 2019 as part of a full portfolio review to re-evaluate investment, major asset and partnership aimed at ensuring the business is well positioned for its future growth.
Over the last financial year, Fonterra witnessed a tough financial period that saw the dairy co-operative widen its loss by 208% to NZD 605 million (US$380.1m) as the company struggled with write-downs across its business amounting US$497.4m.
This prompted the company to launch a new operating model and organization strategy introducing a new customer-led operating model in a bid to drive profitability and focusing on reducing its debt ensuring that it is not more than 3.75 times the earnings.
After nearly three months since company took the new direction, CEO Miles Hurrell said in December last year that the co-operative has made good progress moving to its new strategy, having have posted a strong first quarter.
Over the course of the 2020 financial year, Fonterra now expects there to be other one-off transactions as it continues to implement the new strategy and reviewing its asset portfolio review.
Commenting on the completion of the DFE Pharma sale Fonterra CFO, Marc Rivers, noted that while it is too early to assess its overall impact of on the Co-op’s 2020 financial year, the sale is key milestone in strengthening the Co-op’s balance sheet.
Rivers added; “The announced forecast earnings range will continue to reflect just the underlying performance of the business.
“We will provide details of the overall impact of all one-offs as part of our full-year financial statements and will also provide an update as part of our Interim Results,” Mr Rivers says.
The Co-operative’s early priority in the 2020 financial year has been to get itself in shape to best deliver the strategy. Fonterra’s expects to achieve normalised earnings for the 2020 financial year of 15-25 cents per share.