Fonterra-linked Beingmate's forecast loss doubles

Lukas Paravicini, Fonterra's chief financial office, said trading conditions in China remain difficult. Photo / Supplied.

Chinese infant formula company Beingmate Baby & Child, in which Fonterra has an 18.8 per cent interest, said its expected its loss for 2016 would now come to RMB750 million to RMB800 million ($150.8m to $160.9m) - about double its previous forecast.

The company last year forecast a loss of RMB380m to RMB410 million ($76.4 to $82.4m). The revised loss compares with a profit of RMB103.6 million ($20.7 million) in 2015.

In a translated statement, Beingmate said its fourth quarter revenue and profitability showed a slight improvement but that annual losses had become "more significant than previously expected".

Beingmate said that after discussions with its accounting firm, it had decided to reverse its cumulative deferred income tax assets of RMB300 million.

In addition, it had make a provision for bad debt of its subsidiaries that had suffered excess losses, to a total of RMB61 million.

"The performance forecast correction is the result of preliminary estimate by company's financial department," Beingmate said.

Details of the loss will be revealed when the company releases its annual report in March.

Fonterra's chief financial officer, Lukas Paravicini, said that Beingmate's recent performance reflected China's market conditions, "which remain challenging for all dairy players".

"The long-term outlook remains strong with disposable incomes in China growing by 11.5 per cent a year since 2006, the relaxation of the one child policy taking effect and tightening brand regulations leading to the exit of many smaller competitors from the marketplace," Paravicini said in a statement.

"We are confident in our overall China strategy, of which our Beingmate partnership continues to be an important part," he said.

"Our partnership with Beingmate is a long-term investment to grow in the domestic infant formula market," he said.

"It also supports future ingredient sales of our NZMP brand from New Zealand, and our whey products from Australia and Europe."

Distribution of Fonterra's Anmum infant formula brand in China has grown from 60 cities in 2015 to more than 170 cities today.

Total sales were also ahead of projection, he said.

Fonterra said it would update farmer shareholders Beingmate when the co-op releases its first half result in late March.