The damages payout comes after tribunal arbitration following claims arising from Fonterra’s WPC80 (whey protein concentrate) precautionary recall in August 2013.
As a result, Fonterra has downgraded its share earnings forecast by NZ10 cents (9 cents) to NZ35-45 cents/share (32-41 cents).
The New Zealand dairy co-operative said the tribunal decision has no impact on its forecast farmgate milk price.
Fonterra chief executive Theo Spierings said: “we are disappointed that the arbitration tribunal did not fully recognise the terms of our supply agreement with Danone, including the agreed limitations of liability, which was the basis on which we had agreed to do business”.
The arbitration followed events in August 2013 when Fonterra issued a precautionary recall advice to some customers who had been supplied with its WPC80 ingredient and products containing WPC80. It was later confirmed that there had been no food safety risk to the public.
In a statement, Fonterra said it and the New Zealand government conducted extensive reviews into the events. A follow-up review by the Independent Inquiry commissioned by the Fonterra board of directors confirmed that the co-operative’s management acted in the best interests of its consumers and the co-operative at all times.
“The decision to invoke a precautionary recall was based on technical information obtained from a third party, which later turned out to be incorrect,” Mr Spierings said.
“While there was never any risk to the public, we have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems.
“We operate in a fast-changing and complex industry, and will always prioritise food safety and quality in our commitment to be the world’s most trusted source of dairy nutrition.
“Fonterra is in a strong financial position and is able to meet the recall costs.”
Fonterra said it was reviewing the tribunal’s findings closely, but recognised that there was likely to be limited options for challenging the decision of an international arbitration.