(Reuters) - New Zealand dairy giant Fonterra said on Wednesday it had reached a provisional agreement with Chinese infant formula group Beingmate Baby & Child Food Co Ltd on the key terms to unwind the Darnum joint venture in Victoria, Australia.
“At our 2018 annual results presentation, we signaled that we are undertaking a strategic review of our investments to ensure they’re fit for purpose ... We are looking at all aspects of our investment in Beingmate as part of that broader strategic review. This includes our Darnum joint venture,” the world’s biggest dairy exporter said in a statement.
The company statement said details about the unwinding will be revealed at its quarterly update later this week.
The Darnum plant has produced nutritional powders for more than two decades and the joint venture manufactures products including infant formula for Fonterra, Beingmate and other customers.
In 2015, Fonterra bought a near 20 percent stake in Beingmate as it sought to boost its presence in China’s branded dairy industry.
In September, Fonterra posted its first annual loss as higher milk prices put pressure on earnings, adding to a NZ$405 million ($280.54 million) writedown on its stake in Beingmate in the first half of the year.
China is a crucial market for Fonterra, serving its growing demand for milk products, particularly formula, from the country’s growing middle class.
($1 = 1.4436 New Zealand dollars)
Reporting by Aby Jose Koilparambil in Bengaluru