NEW ZEALAND dairy giant Fonterra will receive about $NZ100 million ($92 million) from European food giant Nestle after a series of deals restructuring the companies’ joint venture in Latin America.
Fonterra, which is the world’s largest dairy exporter and the second biggest milk processor in Australia, on Wednesday announced a shake-up of the 10-year-old Dairy Partners Americas (DPA) joint venture.
Under the changes, Fonterra will take a 51 per cent controlling stake in DPA Brazil and Nestle will hold the remainder.
Fonterra and its local partner will acquire Nestle’s share of DPA Venezuela but will continue to operate as a joint venture.
Nestle, the world’s biggest food company, will buy Fonterra’s share in DPA’s milk powder manufacturing business and will acquire Fonterra’s share in Ecuador.
Fonterra chief executive Theo Spierings said the joint venture had performed well but it was the time to realign the partnership to reflect the strategic priorities of Fonterra and Nestle in the region.
In Fonterra’s case, this is a strategic focus on everyday nutrition in key growth markets such as Latin America, China and Indonesia.
«We value our relationship with Nestle and this high-quality agreement will help our successful alliance continue,» Mr Spierings said.
«This deal also enables the co-operative to drive more long-term value for its farmers and investors.»
Fonterra is a farmer-owned co-operative but non-farmer investors are allowed to own economic rights without voting power through a unit trust listed in Australia and New Zealand.
Fonterra’s Latin American business handles more than 900,000 tonnes of dairy product a year and generates $NZ3.5 billion in revenue.
The Auckland-based company said it expects the transactions to be completed by the end of 2014 and it expects to receive a net cash payment of about $NZ96 million. Fonterra also announced an opening farm-gate milk price of $NZ7 a kilogram of milk solids for the 2014-15 season.
It also reduced its current forecast milk price to farmers to $NZ8.40 ($7.80) a kilogram of milk solids for the season ending this month.
Soaring demand for dairy commodities in Asia has put a rocket under milk prices – driving them to record highs – and has hurt margins on Fonterra’s non-commodity products, which make up about 30 per cent of its production.
Units in the Fonterra Shareholders’ Fund were down 5¢ to $5.50 on Wednesday.
Source: The Australian Dairy Farmer