Make whey: Mengniu benefits from Fonterra’s decline in China
April 11, 2014 Leave a comment
Make whey: Mengniu benefits from Fonterra’s decline in China
Staff Reporter
2014-03-29
New Zealand dairy giant Fonterra Co-operative Group has seen declining profits after botulism-causing bacteria was discovered in its products, while China Mengniu Dairy Company has reported rising revenue because of price hikes and acquisitions, Shanghai’s National Business Daily reports.
Their differing performance relies much on their sales in the mainland China market.
Fonterra’s 2014 fiscal first-half (August 1, 2013 to January 31, 2014) profit tumbled 53% to NZ$217 million (US$188.6 million) from the same period a year earlier. Mengniu meanwhile said on March 26 that its revenue in 2013 grew 20.4% from a year earlier to 43.36 billion yuan (US$6.97 billion), while net profits rose 25.2% to 1.63 billion yuan (US$262.4 million).
Dairy industry expert Wang Dingmian attributed Fonterra’s profit decline to the botulism scandal, which may take time for the company to recover from.
Last year, a wide-scale recall of Fonterra products was announced after botulism-causing bacteria were found. The contaminated whey products had been sold to third parties to produce infant formula and sports drinks. Approximately 1,000 tonnes of products were affected by the recall across seven countries, though there were no reports of cases of food poisoning as a result. China, which imports most of its powdered milk from New Zealand, instituted a temporary ban on the import of the ingredient from New Zealand.
Moreover, although New Zealand’s milk production has reached a new high, Fonterra’s processing capacity cannot catch up with rising production, shrinking its net profits, the report said.
In its fiscal 2013, which ended on July 31, Fonterra recalled products worth NZ$14 million (US$12.1 million), resulting in total revenue falling by 6% from a year earlier to NZ$18.6 billion (US$16.2 billion).
Wang expects Fonterra will need another one to two years before its revenue recovers.
The Chinese government has conducted an anti-monopoly investigation into producers of imported infant formula, thus giving opportunities to domestic dairy producers like Mengniu.
Moreover, in June 2013, Mengniu acquired Ashley Dairy for HK$12.46 billion (US$1.6 billion), the biggest acquisition in the domestic milk industry in recent years.
Excluding Ashley, Mengniu’s revenues last year grew 16.3% from a year earlier to 41.86 billion yuan (US$6.73 billion), surpassing 40 billion yuan (US$6.43 billion) for the first time.
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