New Zealand dairy giant Fonterra has said it is “extremely disappointed” after the Chinese infant formula company Beingmate downgraded its financial outlook for the 2017 financial year. In a statement issued to the Chinese stock market this week, Beingmate said it is forecasting a loss in the region of €100m to €130m. Prior to this, the forecasted loss for the full year had been €45m to €65m.

Fonterra holds a 19% shareholding in Beingmate, having invested more than €450m in acquiring a stake in the business in 2015. In a statement, Fonterra said it would be seeking more financial information from Beingmate as to the reasons behind the losses.

Fonterra said it was also aware that four directors on the board of Beingmate, including two directors nominated by Fonterra, had expressed reservations relating to some aspects of Beingmate’s financial management and reporting practices.

“We are disappointed that Beingmate is not maximising the opportunity created by the early registration of its 51 formulations [of infant formula] under the new registration rules,” said Fonterra.

China is a critical market for Fonterra and the wider New Zealand dairy export industry. China accounts for €2bn, or about 20%, of Fonterra’s annual sales, and contributes about €120m annually to company profits.

Latest setback

The announcement from Beingmate this week is just the latest setback for an investment that has not performed for Fonterra. Beingmate blamed the heavy losses on the regulatory changes in China around the number of infant formula types or brands a company can manufacture, which took effect last October.

The Chinese baby formula manufacturer has endured a very difficult 2017 amid allegations of insider trading and product tampering. In July, share trading in Beingmate was halted on the Shenzhen stock exchange after the company announced plans to begin an asset sale programme to shore up losses.

Beingmate set up its first overseas subsidiary in 2013 when it established a factory in Cork. The Charleville plant operated by Beingmate produces infant formula in partnership with Kerry Ingredients under the “Green LOVE+” brand, which is exported to China.