Giant posts loss

By Country News

New Zealand’s biggest company, dairy giant Fonterra, has posted a loss of $NZ196million ($A179million) — the first annual loss in its 17-year history.

Last year the co-operative — best known for its Mainland and Western Star brands — posted a $NZ734million profit.

But in March this year it reported its first half-year loss on the back of a major write-down on a Chinese investment and a compensation payment for a 2013 botulism scare.

Fonterra on Thursday announced a full-year loss for the 2018 financial year, with underlying earnings before income and tax also down 22 per cent (to $NZ902million) on slightly increased revenue ($NZ20.4billion), but lower margins.

‘‘There’s no two ways about it, these results don’t meet the standards we need to live up to,’’ interim chief Miles Hurrell said.

‘‘We expected our performance to be weighted to the second half of the year. We needed to deliver an outstanding third and fourth quarter, after an extremely strong second quarter for sales and earnings — but that didn’t happen.’’

The company this year wrote down $NZ439million off a troubled $NZ750million investment into Chinese food company Beingmate. It also paid out $NZ232million to French food giant Danone after arbitration for the recall of products in a botulism scare in 2013.

But Mr Hurrell said even without those write-offs, there were still four other areas of difficulty, including overly optimistic forecasting, high butter prices, increased farm gate milk prices paid to its farmers and increasing expenses in parts of the businesses.

‘‘Even allowing for the payment to Danone and the write down on Beingmate, which collectively account for 3.2 per cent of the increase in the gearing ratio, our performance is still down on last year.’’

The company issued a four-point plan to lift its performance along with the result, saying it would start with a review of its Beingmate investment.

It expects underlying earnings before income and tax of between $NZ850million and $NZ950 million for the current year.

‘‘Financial year 2019 is about lifting the performance of our co-operative,’’ Mr Hurrell said.

Fonterra had been searching for a replacement for chief executive Theo Spierings, who announced in May he would be stepping down, but paused its official search in August and appointed Mr Hurrell as the interim head.

The company accounts for about 30 per cent of the world’s dairy exports.