Fonterra has announced it is selling three of its dairy farms in China to Chinese companies for a total of over $555m (€314m). In an email to New Zealand suppliers, CEO Mile Hurrell said the move was in line with Fonterra’s strategy to prioritise New Zealand milk and focus on the company’s competitive advantages. It is unlikely New Zealand farmers will be upset with this move, as the farms have cost Fonterra money since the first investment.

The three farms are to be sold to Chinese companies – two farms going to the China Youran Dairy Group for $513m (€290m). Separately, the Hangu farm sale is agreed for $42m (€23.74m) to Sanyuan Group.

We’ve reached the stage where it is now time to pass the baton to Youran and Sanyuan

In his note to suppliers, Hurrell said: “We have successfully developed the farms alongside local partners, and in doing so, we’ve demonstrated our commitment to the Chinese dairy industry. We’ve reached the stage where it is now time to pass the baton to Youran and Sanyuan to continue the development of the farms. China remains one of our most important strategic markets, receiving around a quarter of our production.”

The Irish Farmers Journal understands the completion of the sale is expected to occur within this financial year.

Fonterra suppliers were not informed whether or not the company will have to take a financial write down on the sale. The CEO’s note said: “Our forecast 2020/21 earnings guidance range, as announced with our Annual Results last month, does not take into account this sale and remains at 20-35 cents per share. It is expected to use the cash proceeds from the sale to continue to pay down debt, as part of our overall debt reduction programme.”