News in Brief:
– Fonterra plans to sell its global consumer businesses, potentially returning NZ$2 per share to New Zealand dairy farmers.
– The move aims to refocus on high-value dairy ingredients, enhancing profitability and supporting local farmers amidst market shifts.
Fonterra Cooperative Group’s decision to divest its global consumer businesses could herald a significant financial windfall for New Zealand dairy farmers. The Auckland-based dairy giant, considering an exit from branded consumer products, aims to refocus on high-value dairy ingredients, according to a news report. This strategic shift, valued at NZ$3.4 billion, could potentially return as much as NZ$2 per share to Fonterra’s 8,300 shareholding farms.
Under the leadership of CEO Miles Hurrell, Fonterra has been scaling back from its expansive ventures of the past decade. The move includes selling off assets in China and South America, alongside iconic brands like Tip Top in New Zealand. By divesting consumer operations such as Anchor and Anlene, which account for a significant portion of its revenue, Fonterra aims to enhance its focus on ingredients like nutritional powders and milk-derived proteins.
“It’s about focusing on what we are good at,” Hurrell emphasised. By concentrating on commercial products and foodservice businesses, Fonterra aims to extract greater value from its core operations. The company plans to continue supplying milk to the brands post-sale, ensuring continuity and expertise in these specialised markets.
For local dairy farmers, the potential capital return represents a crucial financial boost amid ongoing market challenges. Analysts project material returns from the asset sale, potentially between NZ$2.5 billion to NZ$3.5 billion, which could significantly bolster Fonterra’s already robust balance sheet. This could translate into further support for farmers or strategic investments in research and development.
While the divestment process is expected to take 12 to 18 months and requires shareholder approval, it signals Fonterra’s proactive stance in optimising its operations. The move not only aims to streamline operations but also positions the company to capitalise on emerging market opportunities in the dairy sector.
