Fonterra could reap $840m from sale of Chile business, analysts say

Fonterra, which is selling foreign assets to focus on New Zealand milk, could get $840 million for its dairy business in Chile, according to Forsyth Barr analysts.

Chief Executive Miles Hurrell said Thursday the sale of its Chilean Soprole business was making progress.

In a research note on Friday, analysts Forsyth Barr, Matt Montgomerie and Andy Bowley said the performance of Fonterra’s Chile business continued to improve, with full-year earnings before interest and taxes of $92 million — more than doubling as much as the $42 million in 2020.

Also Read :  Zhengzhou, China: Protesters at Foxconn factory clash with police, videos show

Analysts valued the Chile deal at $840 million, seven times estimated earnings before interest, taxes, depreciation and amortization (ebitda) of $120 million.

* Fonterra expects to return $1 billion to shareholders by 2024 as it doubles New Zealand milk
* Fonterra is selling stakes in Chinese farms for $88 million as it downsizes its global footprint
* Fonterra sells Chinese dairy farms for $552 million to reduce debt

Also Read :  Talos Expands EU and US Teams with Key Hires in Sales & Business Development

Similar global dairy companies were sold for nine times ebitda, which would value the deal at $1.08 billion, but analysts have discounted the Chile deal to reflect recent valuation moves, individual market concentration and historical earnings volatility to reflect.

Also Read :  TIAA Global Business Services India appoints Oindrila Majumdar as new CEO

Fonterra has returned its focus to New Zealand milk.


Fonterra has returned its focus to New Zealand milk.

Fonterra said a year ago that it plans to return about $1 billion to shareholders by 2024. The company is selling overseas assets after a global expansion failed to deliver promised profits and left it with too much debt.

However, the company announced on Thursday that it has decided not to sell a stake in its Australian business, noting that it could impact the amount returned to shareholders.

Hurrell said while the company is still committed to “a significant return of capital,” the amount would ultimately be determined by a number of factors, including the successful completion of the divestment program, as well as debt and earnings levels.

Fonterra expects to sell its Hangu China Farm and its Brazilian consumer and foodservice business in the coming year after both sales were delayed.

The company originally agreed to sell its Hangu farm to the 15 percent minority shareholder, but that fell through and it bought the minority stake in January and is actively marketing the farm for sale.

It wrote down the value of its Brazil venture by $57 million in its financial statements, noting that the sale process had been delayed due to Covid-19-related market conditions, but said it remains committed to the sale.

Source link