Fonterra shuts century-old Warrnambool dairy, cuts guidance
May 23, 2019 — 8.17amWellington | New Zealand's Fonterra cut its annual earnings guidance and said it would close a more than 100-year-old facility in country Victoria as dry weather and increased costs further undermine its operations.
The move marks yet another earnings cut for Fonterra, which has been struggling to cut costs and curb debt as its key operations in Australia and New Zealand continue to be battered by harsh weather conditions.
The dairy in Warrnambool first opened in 1911 and at one point employed more than 800 people. not for syndication
The world's largest dairy producer now expects earnings per share for fiscal 2019 in the range of 10-15 New Zealand cents, lower than its earlier guidance of 15-25 New Zealand cents.
The company said it will close its dairy in Dennington Warrnambool, a city of 35,000, because of a recent plunge in milk collections warranting lower production capacity, it said in a statement.
Fonterra currently employs about 98 people at the facility, who will likely be let go.
The dairy, first opened in 1911 and later rebranded Nestle Dennington helped lure migrants to Warrnambool after World War II. At its peak, it employed more than 800 people. Its coffee-roasting operations folded in 2000 and Fonterra took over the site from Nestle five years later.
"This is not a one-off for this season, it's the new norm for the Australian dairy industry and we need to adapt," chief executive Miles Hurrell said. "Dennington is over 100 years old and not viable in a low milk-pool environment."
The company also forecast a farmgate milk price range of $NZ6.25-$NZ7.25 per kilogram of milk solids for the 2019/2020 season, which begins in June.
Earlier this month, the company had reported a large drop in milk collections, but had noted that demand for its products across Asia still remained solid. Fonterra had also hived off its Tip Top ice cream business for about $US250 million ($362 million), as part of a broader strategic review.
The company also said on starting a strategic review of two Chinese farm hubs, and was reviewing options for a possible sale of its stake in a Brazilian venture with Nestle.
Reuters
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