Fonterra to unwind Australian joint venture with China’s Beingmate

AUSTRALIA – New Zealand dairy co-operative Fonterra reached a provisional agreement with Chinese infant formula group Beingmate Baby & Child Food Co Ltd to unwind their joint venture in Darnum, Australia.

The unwinding details which are yet to be disclosed include the Darnum plant which produces nutritional powders including infant formula for Fonterra, Beingmate and other customers.

“At our 2018 annual results presentation, we signaled that we are undertaking a strategic review of our investments to ensure they’re fit for purpose.

We are looking at all aspects of our investment in Beingmate as part of that broader strategic review. This includes our Darnum joint venture,” said the company in a statement.

Fonterra, the world’s largest dairy exporter bought a 20% stake in Beingmate in 2015 for US$553 million with a goal to boost its foothold in the country’s dairy market.

An NZ Herald report revealed that Beingmate earlier told the Shenzhen Stock Exchange it was terminating its agreement with Fonterra Australia and would sell its 51% stake in the Darnum factory to Fonterra or an unidentified party.

Beingmate had also signed cooperation agreement with Chinese state-owned investment company Great Wall Guorong Investment, compounding the speculation that Fonterra was looking to exit its 18.8% stake in the loss making Chinese firm.

In September, Fonterra posted its first annual loss as higher milk prices put pressure on earnings, adding to a US$280.54 million write-down on its stake in Beingmate in the first half of the year.

Reports showed that Beingmate suffered a string of financial losses and faces ­accusations of alleged milk powder tampering.

In the first half of 2017, Beingmate recorded a loss of US$70 million, adding to the US$140 million loss it made in the year 2017.

In July, the Chinese dairy company appointed a new general manager with an aim to refocus its business strategy for growth.

The appointment of a new and independent GM was the first of three key steps Fonterra argued that were in line with Beingmate transformation plan.

For Fonterra, China remains a strategic market given that it imports about a quarter of New Zealand’s total dairy exports to feed growing demand for milk products, particularly formula, from the country’s booming middle class.

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