Danone Nutricia posts full-year loss, blames Fonterra scare

Sales were disrupted in August 2013 when Danone had to recall 67,000 cans of its Karicare infant formula triggered by Fonterra's milk powder contamination warning. Photo / NZME.

Danone Nutricia, the French-owned infant formula maker, has reported a full-year loss it attributes to ongoing fallout from the Fonterra Cooperative Group's botulism scare in 2013.

The New Zealand subsidiary of the French food giant posted a loss of $1.19 million for calendar 2014, compared to a profit of $1.99 million a year earlier.

Danone Nutricia ended its supply contract with Fonterra and launched a $1 billion lawsuit against the dairy cooperative early last year. That followed its sales being disrupted in August 2013 when it had to recall 67,000 cans of its Karicare infant formula in New Zealand triggered by Fonterra's milk powder contamination warning.

The whey protein was ultimately cleared but only after a recall of baby formula products due to concerns children could be harmed.

Chief executive Corine Tap was unavailable for an interview on the company posting a loss but said in a statement that "while recovery from the recall is still ongoing, this includes costs incurred transitioning to alternative ingredient suppliers" following the botulism scare.

Revenue for the year was $252 million, down from $318 million the previous year, while expenses rose to $57.5 million, from $50.1 million the year before. Prior to the recall, the company reported revenue of $143.5 million and $14.15 million profit in the 2012 financial year.

No dividend was paid in the latest year although related party transactions included $2.75 million of interest paid on a $74.4 million loan from the parent through Nutricia International BV, which is a key source of funding for the company. The loan had increased from $63 million the previous year.

Last year Danone Nutricia bought two New Zealand dairy processing companies, the Sutton Group and Gardians. Sutton is best known for its infant formula manufacturing while Gardians operates a milk powder spray drying plant in Balclutha and provides access to milk supply from its 18 farms.

Tap said last year the company intended doubling the capacity of the plants to meet growth expectations. The cost of the acquisition was not revealed at the time of the purchase or in the end of year accounts.

Danone Nutricia lost a legal bid in November to overturn a High Court decision stalling its legal action against Fonterra. The High Court had ruled the companies should attend arbitration in Singapore before any court case, in accordance with their supply agreement.

Danone Nutricia argued that the arbitration award was not due to be released until the middle of 2016 which meant it would have been effectively delayed by 18 to 24 months, pushing out any damages to 2018.

But Justice Douglas White said there was a "real risk of injustice" to Fonterra if the group was diverted from the Singapore arbitration by taking further steps in the High Court action.

Fonterra has said the supply agreement limited the liability cap to A$10 million per claim and A$30 million a year rather than the 350 million euro damages sought by Danone Nutricia.