Fonterra writes Australia down NZ$70m

In a statement, Fonterra chief executive Miles Hurrell said the Australian writedown was the result of supply losses.

"Our Australian Ingredients business is adapting to the new norm of continued drought, reduced domestic milk supply and aggressive competition in the Australian dairy industry," Mr Hurrell said.

"This includes closing our Dennington factory, which combined with writing off the goodwill in Australia Ingredients, results in a one-off impact of approximately $70 million (this includes the $50 million previously announced as part of the Dennington announcement)."

Mr Hurrell said a full review of the business and the preparation of its financial statements made it clear Fonterra needed to reduce the carrying value of several of its assets and take account of other one-off accounting adjustments, which total NZ$820-860 million.

Mr Hurrell said that the majority of the one-off accounting adjustments related to non-cash impairment charges on four specific assets and divestments made this year as part of the portfolio review.

"DPA Brazil, the New Zealand consumer business, China Farms and Australian Ingredients' performance have been improving, but slower than expected and not at the level we had based our previous carrying values on," he said.

DPA Brazil will be impaired by approximately NZ$200 million.

The sale of Fonterra's Venezuelan consumer business and closure of its Venezuelan Ingredients business brought "an accounting adjustment of approximately NZ$135 million relating primarily to the release of the adverse accumulated foreign currency translation reserve.".

China Farms will be impaired by approximately NZ$200 million "due to the slower than expected operating performance".

The New Zealand consumer business will be written down by another approximately NZ$200 million.

This story first appeared on Stock & Land

Read more stories like this on Australian Dairyfarmer