Market expected to react to Fonterra’s whey protein contamination issue.
Fonterra’s share price is likely to react swiftly when markets reopen on Monday morning, as investors assess the impact of food contaminations problems currently embroiling the company. Fonterra shares and units in the Fonterra Shareholders’ Fund were both priced at $7.14 at the close of business on Friday 2, August. This was before news broke of food safety issues involving several batches of whey protein concentrate (WPC-80) produced by Fonterra. As a result of the food safety issue China has placed a ban all types of milk powder imported from New Zealand and Australia. Fonterra’s CEO Theo Spierings has gone to China to work through the issues and Trade Minister Tim Groser says he will also go to China if needed. During the first half of this year China’s imports of New Zealand dairy products were valued at around NZ$1.5 billion, accounting for 25 percent of New Zealand’s dairy export revenue. Market analysts have long identified food safety as a key risk to Fonterra. Fonterra’s share price dropped 32c in the later part of last week following their dividend and milk price announcement. Forsyth Barr last week downgraded their recommendation from “reduce” to “sell”. Whilst the Deutshe Bank’s Market Research team revised their profit forecast down but continue to issue a “hold” recommendation for Fonterra. Whey protein concentrate is an ingredient that is used in infant formula, growing-up milk powder, sports drinks and stock feeds. Three suspect batches of WPC-80 were produced at Fonterra’s Hautapu factory, located in the Waikato, back in May 2012. Tests identified that these batches of WPC-80 contain Clostridium botulinum. As yet there have been no reports of illness which have been linked to Fonterra’s whey protein product. The contaminated batches of whey product have been on sold and mixed with other ingredients to form 870 tonnes of consumer products sold in a va