Fonterra looks at Australian options following release of 2020-21 financial year figures

Rumours have circled for years that Fonterra was set to pull out of Australia. Now the NZ-based processor has announced an “ownership review.”

Fonterra is looking at selling its Australian business via an initial public offering, confirming an ownership review today.

The announcement coincides with the release of the Auckland-based processor’s 2020-21 results, which revealed the Auckland-based processor’s revenue was static at $NZ20.57bn (A$19.9bn) last financial year.

Fonterra chief executive Miles Hurrell said the co-op is considering the most appropriate ownership structure for its Australian operations.

One option includes an IPO, with the intention that the co-op retains a significant stake.

“By having access to ongoing external capital, we believe the Australian business will be best placed to deliver on its strategy and capture its full potential, at the same time as unlocking capital for the co-op,” he said.

“The strength of the Australian business has been demonstrated through recent results and execution of its strategic plan.”

New Zealand’s largest dairy player entered the Australian market in 2005 with the purchase of the Nestle factory near Warrnambool in south-west Victoria.

Fonterra sold the Dennington site last year to ProviCo Australia.

The Auckland-based processor then turned its attention to Bonlac, gaining a foothold in Australia’s butter market by acquiring the Western Star brand.

Fonterra Australia managing director René Dedoncker welcomed the ownership review.

“Today’s announcement is an important milestone for our business which plays a significant role in the Australian dairy industry,” he said.

“It would be a great outcome if Australian investors, including our staff and the farmers who supply us with their milk, could have the opportunity to participate in the ownership of our business with its iconic Australian brands such as Western Star, Perfect Italiano and Bega.

“As we explore our options we will be mindful that our customer and farmer relationships are core to our business.”

Fonterra Australia Suppliers’ Council chairman Alan Davenport said he hoped that ownership options could “present opportunities to further align supplier interests.”

“Farmers are already proud to supply milk for a fantastic stable of local brands, and I am pleased that one of the options under consideration is an IPO of Fonterra Australia,” he said.