Fonterra on the lookout for distressed assets after price slump

Fonterra chief executive Theo Spierings. Picture/Dean Purcell/NZ Herald.

Fonterra is in a strong position to pick up distressed dairy assets around the world after the price volatility of the last few years had left some in bad financial shape, says chief executive Theo Spierings.

Earlier this year, Fonterra was in talks with the financially troubled Argentinian dairy company Sancor, which did not materialise into a deal.

Fonterra has also confirmed that it has talked to the Australian dairy co-operative Murray Goulburn, which is currently undertaking a strategic review, but that it had not entered a bid.

Murray Goulburn, which last month reported a A$370.8 million (NZ$406.7m) after-tax loss for 2016/17, said last week it had received non-binding bids for its assets.

"We are not denying it," Spierings said. "We are talks with people who have a significant amount of milk and who potentially have trouble," he told the Herald.

"There is 15 billion litres of milk production right now in cooperatives around the world where there is real distress," Spierings said.

"Volatility over the last couple of years has impacted their balance sheets when they did not do the same things that we did," he said.

"When you look at latest [Fonterra] financial result, coming after a period of such huge volatility, that puts us in poll position - if you are talking Formula 1 language," he said.

"There are a couple of people back in the pits, who will ask for help."

Fonterra would be on the lookout for regional mergers or alliances and that the co-operative was looking at opportunities in Europe and the United States.

Closer to home, Fonterra has a $6.75/kg milk price forecast on its books for the current year and Spierings said he was "pretty confident" that it would be achieved.