Fonterra, Nestle deal to net $96m

Fonterra CEO Theo Spierings - New Zealand Herald Photograph by Dean Purcell.

Fonterra expects to net $96 million in the next financial year following what it called a realignment of its 10-year-old Dairy Partners Americas 50/50 joint venture with Nestle.

Under the agreements, Fonterra will take a 51 per cent controlling stake in DPA Brazil, with Nestle holding the balance.

Fonterra, together with a local partner, will acquire Nestle's share of DPA Venezuela.

In addition, Fonterra will sell its share in DPA's milk powder manufacturing business to Nestle and Nestle will buy Fonterra's share in DPA Ecuador.

Dairy Partners Americas is the largest dairy company in South America, buying and processing more than two billion litres of milk each year in Brazil alone.

Fonterra chief executive Theo Spierings said the DPA joint venture had performed well for 10 years and now the time is right to realign the partnership to better reflect the respective strategies of Nestle and Fonterra in the region.

The revised alliance supported Fonterra's group strategic focus on everyday nutrition in key growth markets such as Latin America, China and Indonesia, he said.

"We value our relationship with Nestle and this high-quality agreement will see our successful alliance continue," he said in a statement.

Fonterra's managing director of Latin America, Alex Turnbull, said the region's economies had undergone considerable change during the past 10 years.

"We've seen increased prosperity in markets like Brazil with rapid urban growth and a focus on healthy nutrition driving demand for dairy products," he said.

"A bigger stake in DPA Brazil means we will be well placed to drive our volume and value growth strategy focusing on everyday nutrition offerings," he said.

Fonterra's Latin American operation drives more than 900,000 metric tonnes of volume per year and $3.5 billion in revenue from consumer dairy, foodservice and dairy ingredients. The changes to the joint venture are subject to regulatory approval.