New Zealand dairy giant Fonterra is expected to reveal a massive 2018-19 financial loss this morning as it continues to clean up its businesses and attack its huge debt pile.
The company has already warned of the loss which will be the second consecutive yearly lurch into the red – the exact size isn’t known but Fonterra has estimated it will be in the range of $NZ590 million to $NZ675 million.
The culprits – a series of “significant adverse” one-off adjustments from the restructuring program and the impact of the drought on its substantial Australian business.
Fonterra revealed $NZ820 million in August after a long review of its businesses and investments by Fonterra and its advisers.
In what is now a standard way of spinning a bad result, the company yesterday revealed the sale of its 50% stake in pharmaceutical company DFE Pharma for NZ$633 million ($590 million).
The stake has been sold for $NZ633 million dollar sale to CVC Strategic Opportunities II, a fund managed by private equity and investment advisory firm CVC Capital Partners.
It consists of a cash payment of $NZ537 million along with an interest occurring loan of $NZ96 million for a term of up to 15 years. Built into the deal is a potential additional payment of up to $NZ44 million based on DFE’s performance over two years
Fonterra’s chief executive Miles Hurrell said in a statement the sale along with the proceeds from other recent sales, including Tip Top ice cream, gave the company more than $NZ1 billion which will be used to cut debt.
The sale is subject to regulatory approval but Mr. Hurrell said Fonterra would continue to supply “high-quality lactose” to DFE Pharma, which works with pharmaceutical firms to develop pulmonary drugs.
“A big part of the success of DFE Pharma has been the high-quality lactose produced by the team at Fonterra’s Kapuni site in Taranaki and it is a good outcome to be able to continue to supply this,” Mr. Hurrell said.
The price of Fonterra securities closed up slightly at $3 on the ASX yesterday.
