Kiwi dairy supplier Fonterra Cooperative Group is planning to exit Australia as it explores full or partial divestment options for its global consumer business and integrated businesses Fonterra Oceania and Fonterra Sri Lanka.
The divestment plan disclosure came only three months after Fonterra announced it would merge its Fonterra Brands New Zealand and Fonterra Australia to form Fonterra Oceania.
The cooperative said the divestment is part of its change in strategic direction to instead focus on being a B2B (business to business) dairy nutrition provider through its ingredients and food service channel, where it expects to generate further value.
“We have conducted a strategic review which has reinforced the role of our core business. This is working alongside farmers to collect a sustainable supply of milk and efficiently manufacture products valued by customers, to deliver strong returns to farmer shareholders and unit holders,” Fonterra Chairman Peter McBride said.
Fonterra’s global consumer business includes a portfolio of leading brands such as Anchor, Fernleaf, Kāpiti, Mainland, Perfect Italiano, and Western Star.
The Fonterra Oceania business consists of consumer, foodservice, and ingredients businesses. On the other hand, Fonterra Sri Lanka comprises consumer and foodservice businesses.
All businesses within the scope for potential divestment showed remarkable performances in the first half of FY2024.
Within the aforementioned time period, they used 15 percent of the co-op’s total milk solids and contributed 19 percent of Fonterra’s operating earnings.
CEO Miles Hurrell stated that divesting these assets will help develop a simpler but higher-performing organisation and will also allow a new owner, with the appropriate expertise and resources, to unlock the fullest potential of the consumer and associated businesses.
“While I recognise there’s a strong connection to brands such as Anchor, a new owner could help these businesses to flourish,” Mr. Hurrell said. “We have also received unsolicited interest in parts of these businesses, making now a good time to consider their ownership.”
As a next step in the divestment decision, Fonterra will appoint advisors to assist with the process. Due to its sheer size and the amount of shareholder support required, the endeavor is expected to take at least 12 to 18 months.
Alongside the divestment announcement, Fonterra said that Global Markets CEO Judith Swales is resigning from her position, effective July 31.
Mr. Hurrell said the “change in the cooperative’s strategic direction presents a natural juncture at which Judith has considered her future.”
Ms. Swales will remain with Fonterra until her official resignation date.
Meanwhile, Fonterra also reiterated its commitment to its long-term strategy, Our Path to 2030, citing that divestment was a part of the strategy’s objectives.
“Through our work to date, Fonterra has strong foundations which puts us in the position to consider where we will next invest for long-term growth,” Mr. Hurrell says.
“We intend to provide a further update on our revised long-term strategy in due course. This will include further detail on our plans to grow the long-term value of Fonterra and the measures through which we will track our progress.”
The cooperative also intends to terminate its on-market share buyback programme, which was scheduled to run until Aug. 13.
