Fonterra sells China Farms

5 October 2020
FONTERRA SELLS CHINA FARMS

Fonterra has agreed to sell its China farms for a total of $555 million (RMB 2.5 billion*
1
), after successfully
developing the farms alongside local partners.
Inner Mongolia Natural Dairy Co., Ltd, a subsidiary of China Youran Dairy Group Limited (Youran), has
agreed to purchase Fonterra’s two farming-hubs in Ying and Yutian for $513 million (RMB 2.31 billion*
1
).
Separately, Fonterra has agreed to sell its 85 per cent interest in its Hangu farm to Beijing Sanyuan
Venture Capital Co., Ltd. (Sanyuan), for $42 million (RMB 190 million*
1
). Sanyuan has a 15 per cent
minority shareholding in the farm and exercised their right of first refusal to purchase Fonterra’s interest.
CEO Miles Hurrell says in building the farms, Fonterra has demonstrated its commitment to the
development of the Chinese dairy industry.
“We’ve worked closely with local players, sharing our expertise in farming techniques and animal
husbandry, and contributed to the growth of the industry.
“We don’t shy away from the fact that establishing farms from scratch in China has been challenging, but
our team has successfully developed productive model farms, supplying high quality fresh milk to the local
consumer market. It’s now time to pass the baton to Youran and Sanyuan to continue the development of
these farms.”
Mr Hurrell says the sale of the farms will allow the Co-op to prioritise the areas of its business where it has
competitive advantages.
“For the last 18 months, we have been reviewing every part of the business to ensure our assets and
investments meet the needs of the Co-op today. Selling the farms is in line with our decision to focus on
our New Zealand farmers’ milk.
“China remains one of Fonterra’s most important strategic markets, receiving around a quarter of our
production. Selling the farms will allow us to focus even more on strengthening our Foodservice,
Consumer Brands and Ingredients businesses in China.
“We will do this by bringing the goodness of New Zealand milk to Chinese customers in innovative ways
and continuing to partner with local Chinese companies to do so. Our investment in R&D and application
centres in China will support this direction,” says Mr Hurrell.
Completion of the sale, which is subject to anti-trust clearance and other regulatory approvals in China, is
expected to occur within this financial year.

Fonterra Co-operative Group
Page 2

As previously announced, through the sale process and strategic review of our China Farms we gained
additional information and further insights and, as a result, revised down the valuation of these assets.
The transaction value is subject to customary purchase price adjustments, and exchange rate
movements. Any gains or losses on the sale would be normalised upon completion of the sale*
2
.
Fonterra expects to use the cash proceeds from the two transactions to pay down debt, as part of its
previously announced overall debt reduction programme.
*
1
Based on an RMB to NZD conversion rate of 4.5
*
2
The announced forecast earnings will continue to reflect only the underlying performance of the
business.

ENDS

For further information contact:

Philippa Norman
Fonterra Communications
Phone: +64 21 507 072