Fonterra CEO Miles Hurrell has said it is “time to pass the baton” of its China farms to local partners after “successfully developing productive model farms” in the country, selling the hubs for NZ$555 million.
China Youran Dairy Group subsidiary, Inner Mongolia Natural Dairy Co, will purchase Fonterra’s two farming-hubs in Ying and Yutian for NZ$513 million (RMB 2.31 billion), while Fonterra has also agreed to sell its 85 per cent interest in its Hangu farm to Beijing Sanyuan Venture Capital Co for NZ$42 million (RMB 190 million).
“We’ve worked closely with local players, sharing our expertise in farming techniques and animal husbandry, and contributed to the growth of the industry,” said Hurrell.
“We don’t shy away from the fact that establishing farms from scratch in China has been challenging, but our team has successfully developed productive model farms, supplying high quality fresh milk to the local consumer market. It’s now time to pass the baton to Youran and Sanyuan to continue the development of these farms.”
The decision to sell the farms is in line with Fonterra’s focus on its New Zealand farmers’ milk, Hurrell said, and will allow the co-op to prioritise the areas of its business where it has competitive advantage.
“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our production. Selling the farms will allow us to focus even more on strengthening our Foodservice, Consumer Brands and Ingredients businesses in China,” he said.
“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways and continuing to partner with local Chinese companies to do so. Our investment in R&D and application centres in China will support this direction.”
The deal is expected to be completed within this financial year, which is subject to anti-trust clearance and other regulatory approvals in China.
Fonterra ranked in at #1 in the Top 100 Food and Drink Companies 2019 report.
