Fonterra is proceeding with the disposal of its consumer-facing dairy business, with an IPO or sale to a trade buyer put forward as possible options.
The New Zealand-headquartered cooperative, which produces Anchor butter and Mammoth flavoured milk drinks, announced a strategic review of the division in May last year as it plans to focus on dairy ingredients and the foodservice part of the group.
“Through the scoping phase, we have assessed both a trade sale and IPO as attractive divestment options and will now prepare for a sale process which will pursue both options,” CEO Miles Hurrell said today (11 November).
“We will thoroughly test the terms and value of both a trade sale and IPO with the market before seeking support from farmer shareholders for a divestment option through a vote.”
Fonterra added that advisors have been selected to assist with the process, which will also include the disposal of its Fonterra Oceania and Fonterra Sri Lanka business units.
The assets up for divestment “have received meaningful buyer interest”, New Zealand-listed Fonterra said, noting the review concluded that a sale is in its “best interests” and will “maximise value” for shareholders.
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By GlobalDataOther brands in the consumer portfolio include De Winkel and Fresh ‘n’ Fruity yogurts and the Primo line of flavoured milk beverages.
Fonterra’s shares closed today’s trading session up 6.1% at 4.50 New Zealand dollars, taking gains so far this year to 80%.
In putting the consumer division on the market, Hurrell said last year that the assets up for review are “not required to fulfil Fonterra’s core function of collecting, processing and selling milk”.
He added at the time: “Due to our co-operative structure, we believe prioritising our ingredients and foodservice channels and releasing capital in our consumer and associated businesses would generate more value.
“We believe Fonterra is not the highest-value owner of the consumer and associated businesses in the longer term and a divestment could allow a new owner with the right expertise and resources to unlock their full potential.”
Fonterra said previously that the consumer businesses used around 15% of the co-op’s milk solids.
Ingredients is the biggest profit earner for Fonterra followed by the out-of-home channel.
EBIT generated from ingredients, however, slid to NZ$898m ($536.2m) in fiscal 2024 from NZ$1.6bn a year earlier, according to the co-op’s annual results issued in September.
Foodservice delivered NZ$463m in EBIT, up 42%, while the consumer division posted a NZ$199m profit, compared to a NZ$125m loss.
At the group level, EBIT dropped 11% to NZ$1.56bn based on total revenue of NZ$22.8bn, which was down 6.9%.
Profit after tax also declined, falling 25% to NZ$1.2bn, and earnings per share from continuing operations were 70 cents versus 75 cents.
Meanwhile, Fonterra has also let go of other assets, including its minority share in the Lithuanian dairy business Rokiškio Sūris.
It has excited a dairy joint venture in Brazil with Nestlé – Dairy Partners Americas (DPA) – by selling its 51% share to Lactalis, quit operations in Chile through the co-op’s Soprole business and ended another joint venture in India, Fonterra Future Dairy.
