Fonterra mulls divesting Sri Lankan businesses

New Zealand multinational MNC Fonterra Co-operative Group Ltd yesterday announced a step change in its strategic direction which will include the selling of its assets in Sri Lanka.

In a statement issued yesterday, the entity, which includes a portfolio of brands such as Anchor, Mainland, Kapiti, Anlene, Anmum, and others, said the move is to deepen its position as a world-leading provider of high-value, innovative dairy ingredients.

As part of this, the Co-op has announced it is exploring full or partial divestment options for some or all of its global consumer business.

Chairman Peter McBride said this will allow Fonterra to grow long-term value for farmer shareholders and unit holders. 

”We are exploring divestment options for our global consumer business as well as our integrated businesses Fonterra Oceania and Fonterra Sri Lanka,” McBride said.

“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,” he added.  

CEO Miles Hurrell said the review has also given the Co-op confidence in the role it plays in the dairy nutrition value chain, with one of its greatest strengths being the production of world-class, innovative ingredients for customers to take to consumers.

“We believe we can grow further value for the Co-op by focusing on being a B2B dairy nutrition provider, working closely with customers through our high-performing Ingredients and Foodservice channels,” he added. Hurrell elaborated that a divestment of the assets would help create a simpler, higher performing Co-op with our focus.

“While these are great businesses with recent strengthening in performance and potential for more, ownership of these businesses is not required to fulfil Fonterra’s core function of collecting, processing and selling milk. 

“Due to our co-operative structure, we believe prioritising our Ingredients and Foodservice channels and releasing capital in our Consumer and associated businesses would generate more value.  

As a next step, Fonterra will appoint advisors to assist with assessing divestment options. 

The entity said the choices it makes when considering divestment options will be driven by a clear-eyed view of the best value creating pathway for the Co-op – both in terms of the potential proceeds from a sale and the ability for Fonterra to generate consistent economic returns over the long-term. The divestment process will take at least 12 to 18 months.