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UPDATE 3-NZ's Fonterra posts H1 loss on Beingmate stake writedown

Published 21/03/2018, 09:22 am
UPDATE 3-NZ's Fonterra posts H1 loss on Beingmate stake writedown

* World's biggest dairy exporter swings to loss

* Books NZ$405mln writedown on Beingmate stake

* Announces departure of CEO Spierings later this year

* Smaller rival Synlait posts record H1 result

* Fonterra lifts farmgate milk price (Updates grafs 2 and 9 with planned departure of CEO, trims)

By Jane Wardell and Marius Zaharia

WELLINGTON, March 21 (Reuters) - New Zealand's Fonterra FCG.NZ FSF.NZ , the world's biggest dairy exporter, slipped to a half-year loss after booking a large writedown on its stake in Chinese infant formula producer Beingmate.

The company also announced that Chief Executive Theo Spierings will step down at an unspecified date later this year and the international search for his replacement has already begun.

Fonterra on Wednesday reported a net loss of NZ$348 million ($250 million) for the six months to Jan. 31, compared with a profit of NZ$418 million a year ago.

It took a NZ$405 million hit on Beingmate, which cut its full-year guidance in January, and a previously flagged NZ$170 million damages payment to French dairy giant Danone DANO.SA over a contamination scare in 2013.

Without those charges, Fonterra's result was little changed and in line with analyst expectations, amid high inventory levels, low milk collections and higher milk prices.

Its shares were broadly unchanged at NZ$5.82 in early trade.

Chairman John Wilson said strong international demand was continuing to support global prices at current levels, but acknowledged the very dry weather impacting on New Zealand production.

"We will be watching for any impact on market sentiment as spring production volumes build in Europe," Wilson said.

Wilson said the surprise announcement on Spiering's departure had been brought forward from April to quell increasing speculation, adding that formal succession discussions began last November and the board were at the stage of shortlisting candidates.

Wilson said the timing of the announcement was not related to Fonterra's troubles in China. Dutch-born Spierings noted that he is at the outside of the usual CEO tenure of five to seven years, having taken the role in 2011.

Fonterra said in January it was considering the financial implications of its 18.8 percent stake in Beingmate, which it purchased in 2015 as it sought to deepen its exposure to the lucrative Chinese infant formula market. The writedown reduces the value of the stake to NZ$244 million.

"Beingmate's continued under-performance is unacceptable," Wilson said in a statement. "The turnaround of the investment is a key priority for our senior management team."

CHINESE SWINGS AND ROUNDABOUTS

Faring much better in its foray into the Chinese market, Fonterra's smaller domestic rival Synlait Milk SML.NZ reported a record first-half net profit of NZ$40.7 million, benefiting from a branding and distribution deal with a2 Milk ATM.NZ , also for infant formula. said earnings in the second half would not be as strong as it spends more on research and development, but it continued to forecast robust overall earnings growth for the full year.

Analysts said a small rise in Fonterra's farmgate milk price to $6.55/kg from an earlier forecast of $6.40/kg was a surprise, but likely immaterial given the bulk of the product for this season has already been sold.

"We expect dairy prices to continue to ease gradually in the coming months as global supply continues to expand at a relatively steady pace and demand is expected to remain relatively robust," Westpac analysts said in a note, forecasting a $6.50 milk price for the 2018/19 season.

Fonterra also announced an interim dividend of 10 New Zealand cents per share and forecast a full year dividend range of 25-35 cents.

($1 = 1.3924 New Zealand dollars)

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