WELLINGTON (Reuters) - New Zealand's Fonterra <FCG.NZ> <FSF.NZ>, the world's biggest dairy exporter, slipped to a half-year loss after booking a large writedown on its stake in Chinese infant formula producer Beingmate.
Fonterra on Wednesday reported a net loss of NZ$348 million ($250 million) for the six months to Jan. 31, compared with a profit of NZ$418 million a year ago.
It took a NZ$405 million hit on Beingmate, which slashed its full-year guidance in January, and a previously flagged NZ$170 million damages payment to French dairy giant Danone <DANO.SA> over a contamination scare in 2013.
Without those charges, Fonterra's result was little changed and in line with analyst expectations, amid high inventory levels, low milk collections and higher milk prices.
Its shares were broadly unchanged at NZ$5.82 in early trade.
Chairman John Wilson said strong international demand was continuing to support global prices at current levels, but acknowledged the very dry weather impacting on New Zealand production.
"We will be watching for any impact on market sentiment as spring production volumes build in Europe," Wilson said.
Fonterra said in January it was considering the financial implications of its 18.8 percent stake in Beingmate, which it purchased in 2015 as it sought to deepen its exposure to the lucrative Chinese infant formula market. The writedown reduces the value of the stake to NZ$244 million.
"Beingmate's continued under-performance is unacceptable," Wilson said in a statement. "The turnaround of the investment is a key priority for our senior management team."
CHINESE SWINGS AND ROUNDABOUTS
Faring much better in its foray into the Chinese market, Fonterra's smaller domestic rival Synlait Milk <SML.NZ> reported a record first-half net profit of NZ$40.7 million, benefiting from a branding and distribution deal with a2 Milk <ATM.NZ>, also for infant formula.
Synlait said earnings in the second half would not be as strong as it spends more on research and development, but it continued to forecast robust overall earnings growth for the full year.
Analysts said a small rise in Fonterra's farmgate milk price to $6.55/kg from an earlier forecast of $6.40/kg was a surprise.
"Dairy commodity prices need to go up rather than down for them to be able to pay that," Amy Castleton, a dairy analyst at Feilding-based AgriHQ, told Reuters.
Westpac analysts noted that with the bulk of the product for this season already sold, the difference in the forecast was "immaterial".
"We expect dairy prices to continue to ease gradually in the coming months as global supply continues to expand at a relatively steady pace and demand is expected to remain relatively robust," they added in a note, forecasting a $6.50 milk price for the 2018/19 season.
Fonterra also announced an interim dividend of 10 New Zealand cents per share and forecast a full year dividend range of 25-35 cents.
(Reporting By Shashwat Pradhan and Christina Martin in Bengaluru, and Jane Wardell and Marius Zaharia in Wellington.; Editing by David Goodman and John Stonestreet)
