Widening loss forecast at China partner Beingmate leaves dairy giant Fonterra ‘extremely disappointed’ – eDairyNews
Countries New Zealand China |22 enero, 2018

Beingmate | Widening loss forecast at China partner Beingmate leaves dairy giant Fonterra ‘extremely disappointed’

Shares in Zhejiang-based Beingmate plunge by 10pc as Chinese dairy producer says losses could mount to 1 billion yuan.

By: Jane Li

Source: South China Morning Post

Link: http://www.scmp.com/business/china-business/article/2130061/widening-loss-forecast-china-partner-beingmate-leaves-dairy

Fonterra Co-operative Group, New Zealand’s largest company and dairy exporter, said on Monday it was “extremely disappointed” after its China partner, Beingmate Baby and Child Food Company, widened its loss forecast for 2017 from the 350 million yuan (US$54.66 million) to 500 million yuan range to between 800 million yuan and 1 billion yuan.

The company is the world’s largest dairy exporter by volume. It paid US$553 million for an 18. 8 per cent stake in Beingmate in 2015. “As an investor in Beingmate, we are extremely disappointed by this announcement and the ongoing performance of the company,” said Fonterra.

“We are seeking more information on the forecast downgrade in addition to receiving Beingmate’s full year financial statements. We will consider the financial implications on our investment for the purposes of our upcoming interim financial results.” said the company.

China is the world’s biggest market for infant formula products, with more than a third of products sold exported from countries such as New Zealand and Australia. China’s booming middle class prefers overseas products, especially after a scandal in the northern city of Shijiazhuang in 2008, in which baby milk powder was found to contain potentially harmful traces of melamine.

Zhejiang-based Beingmate, one of China’s top domestic dairy producers, has grappled with declining sales in recent years because of fierce competition from foreign brands.

Listed in 2011, Beingmate was once lauded as “the top dairy stock on A share” – it reported a net profit of 721 million yuan in 2013, making it the No. 1 Chinese brand in the sector at the time.

Fonterra pushes plans for own-brand milk in China

The company’s revenue and profit have been in decline since 2014, and it reported a net loss of 781 million yuan in 2016. And now, it faces the risk of being forced to delist by regulators, as it is set to report a net loss for a second continuous year.

According to the rules of mainland bourses, a company will receive a “delist warning” after it reports a net loss for two years.

The company said in a filing to the Shenzhen Stock Exchange on Sunday that it expected China’s new, more stringent milk powder registration rules – coming into effect this year – would lead to a reshuffle in the industry and, thus, potentially lift its revenue prospects as there would be less players.

However, the consolidation is yet to happen and a fierce price war occurred instead, as major players tried very hard to gain market share, said the company.

“The overall sales revenue target, thus, was not achieved, especially with an increased marketing fee we had last year,” said Beingmate.

The company did not respond to an emailed request for comment, while calls to its headquarters in Zhejiang went unanswered.

Shares of the company plunged to the 10 per cent daily limit in Shenzhen on Monday.


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