The Chinese infant formula company said it forecasted a loss of between $150.8 million and $160.9m in 2016, up from last year’s forecast for a loss of between $76.4m and $82.4m.
Fonterra signed off a deal to invest $700m in Beingmate for an 18.8 per cent stake in the company in 2015.
Beingmate attributed the increased loss forecast to the reversal of deferred tax assets, as well as because of a provision for subsidiaries which had suffered losses.
Fonterra chief financial officer Lukas Paravicini said Beingmate’s performance reflected Chinese market conditions which were challenging for all dairy players.
But he said the long-term outlook was strong as disposable income grew, the one child policy was relaxed, and because of tightening brand regulations.
Euromonitor has forecast that with the loosening of the one-child policy, sales of infant formula will jump from US$19 billion last year, to over US$50b by 2020.
Beingmate would announce its full results in March, Paravicini said, from which Fonterra would be able to assess the situation in more detail.
«We are confident in our overall China strategy, of which our Beingmate partnership continues to be an important part,» Paravicini said.
«Our partnership with Beingmate is a long-term investment to grow in the domestic infant formula market.»
Paravicini said the Beingmate partnership supported its sales of its NZMP brand from New Zealand, as well as whey products from Australia and Europe.
The distribution of its Anmum infant formula brand had grown from 60 cities in China in 2015 to more than 170 cities.
«Our total sales are also ahead of projection.»
Last July, Beingmate blamed a case of alleged milk powder tampering for its forecast los of up to $48m for the first quarter of the financial year.
It had previously predicted a $21m profit, but said «fake infant formulas» had caused it to revise this to a loss of between $44.5m-$48m.
This followed a case of an authorised Beingmate infant formula dealer who had been linked to a ring that bought cheaper powder and repackaged it so it appeared to be a more expensive product.
Source: Stuff
Link: http://www.stuff.co.nz/business/88752989/fonterra-defends-struggling-chinese-partner-as-longterm-investment
