Fonterra has decided to close its Dennington factory in Australia later this year.
Fonterra reported an after tax loss of $196 million for the 2018 financial year on Thursday morning.
The Weekly Times said the closure of the factory in south-west Victoria, which produces a range of milk powders for the domestic and export market, would affect more than 90 workers.
The decision follows a rash of other recent moves by the dairy giant to lower debt, following last year’s historic first financial loss of $186 million.
So far it has sold ice cream brand Tip Top to international manufacturer Froneri for $380m, has started a sales process for its 50 per cent share of DFE Pharma, a joint venture established in 2006 between Fonterra and FrieslandCampina, and offloaded its interest in its Venezuelan consumer joint venture, Corporacion Inlaca, to Mirona, an international food business, for $16m.
Fonterra farm source general manager Matt Watt said axing the Dennington plant in November was a difficult decision.
«Fonterra – like many other processors and farmers across Australian dairy – continues to feel the impact of industry structural changes and a reduction in the Australian milk pool, leading to excess capacity across the industry.»
Frank Kelly, the site’s delegate for the National Union of Workers, said the factory had been running at only about 30 per cent capacity.
It is believed there are about 200 farmers who supply milk to Fonterra’s Dennington and the nearby Cobden plants.
As recently as January last year Fonterra had announced the Dennington site had secured about $8.6m for a new 25kg packing line for nutritional powders. The Dennington and Cobden sites were included in a capacity expansion programme worth $165m across seven of Fonterra Australia’s sites.
But in February this year the head of Fonterra Australia Rene Dedoncker signalled the start of a general retreat. Its Australian milk collection was down 14 per cent for the last six months of 2018 and he said it was having to fight to shore up milk supply to keep its factories running.
Fonterra took over the Dennington plant in August 2005 from Nestle Australia.
In New Zealand Fonterra said it would update media with developments, including its plans for the plant.