Fonterra's Chinese partner expects loss

In March Fonterra paid 3.5 billion yuan (roughly $754 million at that time) for its shareholding in the Chinese company. Photo / NZME.

Fonterra says it is disappointed about a poor first-half result expected by its Chinese infant formula investment, Beingmate Baby & Child.

The Shenzhen-listed company, in which the New Zealand dairy giant purchased an 18.8 per cent stake this year, says it expects a net loss of 95 to 105 million yuan in the first six months of its financial year compared with a 107.8 million yuan profit in the same period a year earlier.

In March Fonterra paid 3.5 billion yuan (roughly $754 million at that time) for its shareholding in the Chinese company.

The investment is part of a tie-up with Beingmate that includes a Chinese distribution deal for Fonterra's Anmum infant formula brand, which began sales in China in 2013.

Beingmate said in a stock exchange announcement that it was facing "market share challenges" in supermarkets and other traditional retail channels.

A Fonterra spokesman said the partnership was part of a long-term strategy in China.

"While this latest performance announcement is disappointing, it should not be viewed as an indicator of the future performance of this partnership," he said.

"Beingmate has an extensive distribution network - including online sales which continue to be a key area of focus - and local knowledge that complements Fonterra's commitment to food safety and quality."

Like more than 1400 other stocks listed across the Shanghai and Shenzhen exchanges, Beingmate shares were halted last week amid a rout that has wiped trillions of dollars off the value of Chinese equities.

Trading resumed yesterday.