Monday, 05 October 2020 09:26

Fonterra sells China farms 

Written by  Staff Reporters
Fonterra is selling its China farms for $555 million. Fonterra is selling its China farms for $555 million.

After investing over $1 billion and following 10 years of poor returns, Fonterra has agreed to sell its China farms for $555 million (RMB ¥2.5 billion).

The agreement follows another recent downgrade of the value of Fonterra’s operations in China. 

Inner Mongolia Natural Dairy Co., Ltd, a subsidiary of China Youran Dairy Group Limited (Youran), has agreed to purchase Fonterra’s two farming-hubs in Ying and Yutian for $513 million (RMB ¥2.31 billion).

Separately, Fonterra has agreed to sell its 85% interest in its Hangu farm to Beijing Sanyuan Venture Capital Co., Ltd. (Sanyuan), for $42 million (RMB ¥190 million). Sanyuan has a 15% minority shareholding in the farm and exercised their right of first refusal to purchase Fonterra’s interest. 

Fonterra chief executive Miles Hurrell says the co-op has demonstrated its commitment to the development of the Chinese dairy industry through its farms.

“We’ve worked closely with local players, sharing our expertise in farming techniques and animal husbandry, and contributed to the growth of the industry.”

Hurrell says the sale of the farms will allow the co-op to prioritise the areas of its business where it has competitive advantages.

“For the last 18 months, we have been reviewing every part of the business to ensure our assets and investments meet the needs of the co-op today. Selling the farms is in line with our decision to focus on our New Zealand farmers’ milk.

“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production. Selling the farms will allow us to focus even more on strengthening our foodservice, consumer brands and ingredients businesses in China.

“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R&D and application centres in China will support this direction,” says Hurrell.

Completion of the sale, which is subject to anti-trust clearance and other regulatory approvals in China, is expected to occur within this financial year. 

Fonterra expects to use the cash proceeds from the two transactions to pay down debt, as part of its previously announced overall debt reduction programme.

More like this

Fonterra's Chinese New Year boost

China's New Year celebrations were almost back on track this year, helping Fonterra record double growth digit growth in its consumer brands sales.

National

Dry cow therapy minus antibiotics

Taranaki sharemilker Shaun Eichstaedt was the first New Zealander to replace traditional antibiotic dry cow therapy (DCT) with a high-strength…

Changes are afoot

There has been a mixed response by the agriculture sector to the recently released Climate Change Commission’s 2021 draft report. 

Machinery & Products

Merlo goes greener

Obviously not wishing to get left behind by some of its competitors, Italian manufacturer Merlo is planning to add to…

» The RNG Weather Report

» Latest Print Issues Online

Milking It

Oat milk sells

OPINION: Fake milk works for some. Fashionable Swedish alt-milk brand Oatly is seeking a US stock market listing that could…

Labour shortage

If you think labour shortage on New Zealand dairy farms is unique to our country, then think again.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter