Fonterra to sell Australian yoghurt and dairy dessert business to Parmalat Australia

Fonterra Co-operative Group has signed an agreement to sell its Australian yoghurt and dairy dessert business to Parmalat Australia, following exclusive negotiations.

The deal is expected to be completed in the first half of fiscal 2016, after regulatory and other approvals.

The sale of Fonterra Australian yoghurt and dairy desserts business includes manufacturing facilities at Tamar Valley and Echuca, as well as its brands.

This move is part of Fonterra’s comprehensive strategy to return its Australian business to sustainable profitability.

The sale is a core part of the earlier announced plans for its Australian business.

Fonterra CEO Theo Spierings said: "We are focusing on areas where we can win in a highly competitive market, and that means optimising our product mix and streamlining operations to match, and investing in higher value add products that will deliver the best returns for our farmer shareholders and unit holders.

"Australia is our largest milk pool outside New Zealand, and is an integral part of our multi-hub strategy. Our Australian operations have particular ingredient strengths in cheese, whey and nutritionals, complemented by our strong consumer and foodservice businesses. As a key part of our multi-hub strategy, we are matching these strengths with the opportunities across our 100 markets."

Fonterra managing director for Oceania Judith Swales said: "We will continue investing in programmes and innovation that supports our market-leading brands in key retail categories, including Western Star butter and Perfect Italiano, Mainland and Bega cheeses, Anchor cream, and fresh milk.

"Divesting the yoghurt and dairy desserts business will allow us to focus on what we do best, so we can continue delivering a competitive milk price to our suppliers, benefits to our customers, innovative dairy foods to our consumers, and improved returns to our farmer shareholders and unit holders."

Parmalat has sent offers of employment to all Fonterra’s Echuca and Tamar Valley employees in the yoghurt and dairy dessert business.

Fonterra has recently announced a A$120m ($86.77m) investment to rebuild its facility in Stanhope, in northern Victoria, as a primary cheese manufacturing plant, with 50% extra capacity.

It also sold its 9% stake in Bega and the proceeds from the transaction are being re-invested into the Stanhope cheese plant. A multi-million dollar beverages plant at its Cobden facility, western Victoria, was commissioned to service a ten-year partnership with Woolworths. It has also launched global brand Anchor in Australia.