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New Zealand Fonterra losts all $200 million investment in China joint venture

Posted by Author on November 27, 2008

3 News, New Zealand, Wed, 26 Nov 2008 –

The Fonterra board openly concedes that it has had a difficult time and that San-Lu will going to go down in history as a bad investment for them.

When Fonterra’s top brass fronted before the country’s dairy farmers there was not a lot of good news to deliver.

Firstly, Fonterra is now admitting it has lost all of the $200 million of investment in the San-Lu joint venture.

“For this reason it is increasingly likely that we will have to write off the remaining $62 million of value in our San-Lu investment,” stated Fonterra’s Chairman Henry Van Der Heyden.

Fonterra had a 40 percent stake in San-Lu, which collapsed due to the contaminated milk-powered controversy.

Fonterra’s management says it is reviewing what went so badly wrong and concedes it had limited control.

Not only has that investment been written off, but there are warnings about the global recession. Farmers should not expect big milk payouts in the future.

“In an environment when a global recession will impact on our payout to [farmers] into the future we will continue to aggressively reduce costs,” explains Van Der Heyden.

It is a worrying signal as Fonterra is New Zealand’s biggest company and our biggest exporter.

Consequently, where Fonterra goes, so too does the New Zealand economy.

The company says it has a three year business plan and is confident of an eventual rebound.

Fonterra’s Chief Executive expects his income of just under $4 million a year will reduce and the chairman and directors have decided to turn down a proposal to increase their fees.

3 News

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