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Fonterra Set to Sell its Yoghurt Business to Parmalat Australia

Fonterra Set to Sell its Yoghurt Business to Parmalat Australia
Dec 16, 2015 By Simon Herrmann Tags: FSF

Fonterra Co-operative Group Limited (ASX:FSF) announced that it intends to sell its yoghurt and dairy desserts business in Australia to Parmalat Australia Pty Ltd.

Both Fonterra and Parmalat have signed a sale agreement, which is conditional on regulatory and other approvals. The sale is expected to be completed in the first half of CY16.

Fonterra’s Australian yoghurt and dairy desserts business includes manufacturing sites at Tamar Valley and Echuca and its Australian yoghurt and dairy dessert brands. The sale is aimed at bringing the co-operative’s Australian business into profit.

This sale aligns with the Co-operative’s previously announced plans for its Australian business. Recently, Fonterra announced that it has made an investment worth A$120 million in its Stanhope cheese factory in northern Victoria.  The Co-operative divested its 9 percent stake in Bega and the funds have been re-invested into the reconstruction of the Stanhope factory.

Fonterra has also announced plans with Bellamy’s Australia Ltd and China’s Beingmate Baby and Child Food Company Ltd that provide potential opportunity for significant growth in nutritional volume from Fonterra Australia. The Co-operative also commissioned a multi-million dollar beverages plant at its Cobden facility, in western Victoria, to service a 10 year agreement with Woolworths.

Theo Spierings, the Chief Executive of Fonterra said that the aforementioned changes were the result of the Co-operative’s commitment to an active strategic plan to transform its Australian business.

Mr. Theo commented on Fonterra’s strategic plans: “We are focusing on areas where we can win in a highly competitive market, and that means optimising our product mix and streamlining operations to match, and investing in higher value add products that will deliver the best returns for our farmer shareholders and units. Australia is our largest milk pool outside New Zealand, and is an integral part of our multi-hub strategy.”

FSF last traded at $5.47 as at 11:20 AM (AEDT) and is down approximately 5 percent for the year.

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Simon Herrmann Author: Simon Herrmann Dec 16, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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