Tuesday Nov 26, 2024
Tuesday Nov 26, 2024
Friday, 17 May 2024 00:56 - - {{hitsCtrl.values.hits}}
Renowned New Zealand dairy giant, Fonterra Co-operative Group Ltd., is contemplating the sale of its Sri Lankan business as part of a broader review of its global operations.
In a statement released, Fonterra announced its exploration of ‘full or partial divestment options’ for some or all of its global consumer business, including its integrated businesses Fonterra Oceania and Fonterra Sri Lanka.
Fonterra Chairman Peter McBride highlighted the importance of focusing on the core business of working alongside farmers to collect sustainable milk supplies and efficiently manufacture products valued by customers.
McBride emphasised the co-op’s commitment to delivering strong returns to farmer shareholders and unit holders.
CEO Miles Hurrell echoed these sentiments, expressing confidence in Fonterra’s role in the dairy nutrition value chain. Hurrell said the co-op’s strength in producing world-class, innovative ingredients for customers and its potential for further value creation by focusing on being a B2B dairy nutrition provider.
In this context, Hurrell disclosed Fonterra’s exploration of divestment options for its global consumer business, Fonterra Oceania, and Fonterra Sri Lanka. These businesses collectively utilise around 15% of the co-op’s total milk solids and represent around 19% of Fonterra Group’s operating earnings in the first half of FY24.
While acknowledging the strong performance of these businesses, Hurrell noted that ownership of these assets is not essential for Fonterra to fulfil its core function. He stressed that prioritising the ingredients and foodservice channels and releasing capital in the consumer and associated businesses could generate more value for the co-op.
Moreover, Hurrell pointed out that Fonterra may not be the highest-value owner of the Consumer and associated businesses in the longer term, suggesting that a divestment could allow a new owner with the right expertise and resources to unlock their full potential. The potential divestment presents an opportunity for brands such as Anchor and others to flourish under new ownership, according to Hurrell.
He noted that Fonterra has already received unsolicited interest in parts of these businesses, indicating favourable conditions for considering divestment. As a next step, Fonterra plans to appoint advisors to assist with assessing divestment options, marking the beginning of a strategic transition in the co-op’s global operations.
