October 5, 2020
New Zealand's Fonterra to sell its dairy farms in China for US$368 million
New Zealand-based Fonterra said it agreed to selling its farms in China for NZD 555 million (~US$367.97 million; NZD 1 = US$0.66) to focus on the New Zealand market and lower its debt, Reuters reported.
In 2019, Fonterra announced that it will stop its overseas expansion plans after being criticised by its cooperative, which has 10,000 New Zealand farmers, for its China market presence and its value-added consumer products that were negatively affecting its profits.
Miles Hurrel, chief executive officer for Fonterra said they have been reviewing their business for the past 18 months to ensure their assets and investments meet the cooperatives' needs, adding that the sale of their farms in China will ensure the company's focus on the domestic market.
The company also said the sale will help Fonterra better prioritse its foodservice, consumer and ingredients business efforts in China, which is its biggest market.
Two Chinese companies have purchased the farms. Youran Dairy Group paid NZD 513 million (~US$341 million) for two farming-hubs located in Ying and Yutian, while Beijing Sanyuan Venture Capital will acquire an 85% stake in Fonterra's Hangu farm.
Fonterra said the cash proceeds from the sales will be used to pay down its debt, which it had reduced by NZD 1 billion (~US$664.8 million) as of September this year.