The world’s largest dairy exporter has posted its first ever annual loss as the knock-on effects of a bad investment in China reverberate in the business.
Fonterra, New Zealand’s largest company owned by 10,000 dairy farmers, posted an after-tax loss of NZD$196m (£98.3m) for the first time in the company’s 17-year history.
The processor has been hit with a double whammy of costs; a NZD$405m (£203.1m) writedown on an 18.8% share in Chinese infant formula manufacturer Beingmate and a NZD$183m (£91.3m) payout to Danone following a botulism scare in 2012.
Interim chief executive Miles Hurrell also cited overly optimistic forecasting, higher butter prices, an increase in the forecasted farmgate milk price and higher-than-anticipated operating expenses in some parts of the business as key factors in the loss.
Mr Hurrell stepped in as acting boss in March following the resignation of former chief executive Theo Spierings when the dairy processor published half-year losses of NZD$348m (£174.6m).
It was revealed Mr Spierings was given a NZD$8.1m (£4.1m) payoff when he quit the top job, with 24 members of Fonterra staff being paid in excess of NZD$1m (£500,000) and a further 6,000 receiving salaries above NZD$100,000 (£50,000).
“We are not going to deny the fact that it is a really disappointing result,” said Mr Hurrell.
“We need to get out there and show [farmers] that we do have a plan going forward and will deliver on our promises into the future.”
The company has been criticised by market analysts for operating conflicting business models: trying to achieve the best price for its farmer-owners while also competing on price with wholesale rivals such as Danone and Nestlé on tight margins in international markets.