Fonterra has announced a major revamp of its farmer-director election process.
The co-op has offloaded its stake to Mirona, an international food business for $16 million.
However, the devaluation of the Venezuelan currency means the co-op will take a hit of $126m on its balance sheet.
“The decision to sell Inlaca is the result of ongoing instability in Venezuela which has led to challenging operating conditions,’ says Miles Hurrell.
“The economic situation in Venezuela is not expected to improve in the foreseeable future, so we have made the decision to act now to minimise the impact on Fonterra,” he says.
Fonterra received $16 million for the Inlaca sale.
In its media statement, the co-op says like any multi-national business, Fonterra is exposed to currency risk on its overseas operations and the impact of changes is held in a foreign currency translation reserve (FCTR). “When a business is sold there is a non-cash accounting adjustment that releases the accumulated FCTR to the profit and loss statement.
“The full impact of this transaction, including the devaluation of the Venezuelan currency which has resulted in a negative FCTR balance of approximately $126 million, will be reflected in the profit and loss statement.
“This sale is not directly included in Fonterra’s half-year results, and the impact of the FCTR on the profit and loss statement has not been reflected in the forecast earnings per share range.
“Fonterra expects there to be a number of one-off transactions and adjustments over the course of its financial year (some positive and some negative). The sale of Inlaca would have an 8c/share negative impact on earnings.”