Fonterra has to make a tough decision by reducing its assets value (Image via: TVNZ)

Fonterra to Experience A Huge Loss

Kirana Chandra Mumpuni Budiana
Business & Industry
Agriculture& Livestock
Aug 13, 2019
2823
New Zealand multinational dairy co-operative Fonterra just made announcement about its difficulty in overseas. The company needs to reduce the value of assets in many countries, including Brazil, China, New Zealand, Australia, and Venezuela. The financial situation becomes worse for Fonterra that the customer business was sold in Venezuela. Meanwhile, the growth in other markets has been slowing down.

Fonterra blamed the struggle in overseas markets to various problems in many countries. The sales volumes and prices got ruined in Brazil due to the country’s economy. In Australia Fonterra hit by bad luck of natural disaster, which is drought. The company’s milk supplies got reduced, while the industry competition is still going on. Fonterra has been meeting the same fate in China and Venezuela with its weak business. The company forced to write down its investment in China last year. It was the investment in Beingmate. Chief Executive Miles Hurrell stated the company has been re-evaluating all investments, major assets, and partnerships in the last year. He promised that Fonterra will do the best to increase its performance.

However, the estimation of $675 million would be the second big lost. Fonterra had lost $196 million last year. Fonterra's share price is decreasing, instead of going higher to $8 just like the analysts expect. On Monday it went down to just $3.57. The deterioration of Fonterra is hurting the farmers. Agri-business analyst and Fonterra shareholder Jacqueline Rowarth said that farmers feel unappreciated. The company’s added value strategy has been questioned by experts. This is because the dividends for the farmers have never been very big. The disappointment of the farmers can be a problem since agriculture in terms of economy depends on them. Fonterra will have to reassure the farmers more about the cash flow.

Source: https://www.newshub.co.nz/home/rural/2019/08/fonterra-loss-signals-more-pain-to-come-for-new-zealand-dairy-farmers-analyst.html

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