Making it all easier

Date 09.27.2019 | Category: News
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In what will be seen as a scaling down of its global ambitions, New Zealand dairy giant Fonterra has unveiled a new strategy based on concentrating on its more successful ventures closer to home, writes GlobalData.

But is this defensive and seemingly short-term strategy the right one? The main objective seems to be to get Fonterra back on a firm footing after a disastrous 18 months but such a conservative approach comes from a company that once had plans to conquer the dairy world.

Fonterra will be hoping the fallout from its less successful forays – many of them in overseas markets – will now soon be behind the company after it posted a record annual loss of NZD605m (US$379.3m) on 26 September.

The world's largest dairy exporter plans to phase out overseas milk pools, cut debt and concentrate on its local production. The group also plans to focus on supplying dairy ingredients to global customers and build its business into foodservice in Asia Pacific.

CEO Miles Hurrell said Fonterra would be a "leaner, more focused business" under its new strategy.

The need for a new strategy is largely the result of poor performance from its overseas ventures. It announced a write-down of up to NZD860m on assets in Brazil, Venezuela and China in August.

Fonterra hopes disposals will allow the company to exceed its debt reduction target of NZD800m in 2020.

However, Fonterra still has to sort out its troubled relationship with Chinese joint venture partner Beingmate. It is currently looking at options to reduce its financial stake in the embattled infant formula business.

Hurrell said 2019 was "incredibly tough" for the cooperative but it was also the year Fonterra made decisions to set it up for future success. Time will tell if that pays off.

Source: GlobalData
Author: Sossna
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