Fonterra seeks trading halt pending Danone arbitration result

Friday 1st December 2017

Fonterra Cooperative Group has sought a trading halt ahead of a decision in its dispute with Danone over the whey protein contamination in 2013.

The French food giant sued Fonterra seeking damages of up to 630 million euros over the food scare, and the New Zealand dairy company today said it's been told it will get the tribunal decision in a Singapore arbitration today. It will update the market "as soon as possible" after that, but won't immediately be in a position to assess the financial implications. Fonterra Shareholders' Fund units last traded at $6.36.

"Fonterra remains in a strong financial position and any damages award will not affect our ability to operate," Fonterra chief executive Theo Spierings said in a statement. "We will share further details with the market, our farmers and staff as soon as practical."

Danone launched arbitration proceedings in Singapore and a legal suit in the New Zealand High Court, estimating the cost of recalling the whey protein concentrate to be about 350 million euros. At the time, Fonterra said it expected any court action would show the Kiwi firm didn't have any liability in the contract, and it recognised a contingent liability of just $14 million over the recall.

In 2014, New Zealand's Court of Appeal upheld an earlier decision that the Singapore arbitration proceedings should be the first avenue, as provided for in the contract, but refused to permanently stay the legal suit.

In 2013, Fonterra quarantined several batches of whey protein concentrate amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria. The whey protein was ultimately cleared as a false alarm. Fonterra cut deals with seven of the eight customers affected.

Danone's New Zealand subsidiary Danone Nutricia ended its supply contract with Fonterra after the botulism scare. Since then, it's sourced product from Synlait Milk and other manufacturers and bought two Kiwi dairy processing companies, Sutton Group and Gardians, with the latter providing access to milk supply from 18 farms owned by Grant Paterson of Dunedin.

(BusinessDesk)

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