The chill in Brazil: Fonterra and Nestlé sell DPA joint venture for NZ$210 million

São Paulo, the biggest urban economy in Brazil. Fonterra and Nestlé created DPA to manufacture and commercialise dairy products across Latin America. Photo / Getty

Fonterra and international food group Nestlé have agreed to sell their Dairy Partners Americas (DPA) Brazil joint venture to French dairy company Lactalis for 700 million Brazilian real (about $210m).

The co-op said the deal is expected to be completed by mid-2023, subject to regulatory authority approvals.

Fonterra chief executive Miles Hurrell said the sale of DPA Brazil aligned with the co-op’s strategy of prioritising its New Zealand milk pool.

“DPA Brazil has reached maturity as an investment for us, and the sale allows us to prioritise our resources to the businesses that are core to our strategy,” Hurrell said.

Fonterra said the sale was delayed due to market conditions related to Covid-19.

DPA Brazil had been held for sale in Fonterra’s financial statements since January 2020.

Fonterra and Nestlé created DPA in 2003 to manufacture and commercialise dairy products throughout Latin America.

In 2014, the joint venture refocused its activities on Brazil and chilled dairy.

Fonterra holds a 51 per cent stake and Nestlé 49 per cent.

DPA operates two plants and employs 1,300 people.

Nestlé, Chamyto, Ninho, Chandelle, Chambinho, Neston and Molico are among the well-known brands DPA marketed in Brazil.

The sale is subject to receipt of regulatory approvals from competition authorities.

Fonterra’s previously announced 2023 earnings guidance will still reflect the underlying performance of the DPA Brazil business during the pre-completion period.

The co-op said it would provide an update on the overall impact of its divestment programme as part of its 2023 financial reporting.