Friday, March 29, 2024

Fonterra units drop after Danone launches legal action

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Units in the Fonterra Shareholders’ Fund fell after French food processor Danone ended its supply contract and launched legal proceedings against the New Zealand dairy exporter.
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The units fell 1.5% to $5.77.

The French company would file papers in the High Court in Auckland today and had already served the arbitration papers.

Danone, the parent company of infant formula manufacturer Nutricia, lost millions of dollars through decreased baby milk sales because of the Fonterra food scare last August.

Fonterra quarantined several batches of whey protein concentrate amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria. 

The whey protein was ultimately cleared as a false alarm.

“It’s hard to know at this point how much of a claim by Danone is real and how much is negotiating tactics,” managing director at Salt Funds Management, Matt Goodson, said. 

“At the moment this is a very news story driven equity market.”

Goodson said he had been struggling with the fund as an investment.

Fonterra has had to contend with rising whole and skim milk powders prices not being matched for manufactured products such as cheese.

“We really need to see a reversal with those markets for the fund to benefit,” he said.

Last month Fonterra cut its dividend forecast to 10 cents a share from 32 cents while keeping the milk price at $8.30 a kilogram of milk solids.

Calculations showed the price should rise to $9 per kg MS. 

Related story: Danone launches court action against Fonterra

– BusinessDesk 

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