Danone pins loss on ongoing fallout from Fonterra botulism scare

Nutricia recalled 67,000 Karicare formula cans. Photo / Bevan Conley

Danone Nutricia, the French-owned infant formula maker, has reported a full-year loss it attributes to the continuing effects of the Fonterra Co-operative Group's botulism scare in August 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 early last year after its sales were disrupted by the recall of 67,000 cans of its Karicare infant formula triggered by Fonterra's warning of milk powder contamination.

The whey protein was ultimately cleared.

Chief executive Corine Tap said "while recovery from the recall is still ongoing, this includes costs incurred transitioning to alternative ingredient suppliers" after 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.

Before 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, 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 supplies milk 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 the arbitration award was not due to be released until mid-2016 effectively delaying it 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 High Court action further.

Fonterra has said the supply agreement limited the liability cap to $10.79 million per claim and $32.3 million a year.