Fonterra says it is disappointed about a poor first-half result expected by its Chinese infant formula investment, Beingmate Baby & Child.
The Shenzhen-listed company, in which the New Zealand dairy giant purchased an 18.8 per cent stake this year, says it expects a net loss of 95 to 105 million yuan in the first six months of its financial year compared with a 107.8 million yuan profit in the same period a year earlier.
In March Fonterra paid 3.5 billion yuan (roughly $754 million at that time) for its shareholding in the Chinese company.
The investment is part of a tie-up with Beingmate that includes a Chinese distribution deal for Fonterra's Anmum infant formula brand, which began sales in China in 2013.
Beingmate said in a stock exchange announcement that it was facing "market share challenges" in supermarkets and other traditional retail channels.