I’ve been critical of the spin coming from the Fonterra hierarchy over the years but their effort on the Beingmate debacle overshadows everything else.

 

For a start, on October 3 last year you can read how Fonterra wasn’t regretful about Beingmate.

Chairman John Wilson told us the board has no regrets over the $700 million investment in troubled Chinese child nutrition trader Beingmate.

By contrast you can read a Credit Suisse report dated September 6 last year, almost a month before the Fonterra supportive statement, telling us Beingmate had recently come out of a trading halt and sales and earnings are significantly down on when Fonterra invested and have not delivered to date.

What I found interesting was the company position, expressed by Wilson, was at variance with the Credit Suisse position a month earlier.

Surely the co-op would have been aware of that.

That Credit Suisse report came ahead of another on September 6 that said the Fonterra updates on Beingmate since it invested have been limited.

They also said Beingmate has moved from a net cash position to a net debt position at the end of the 2016 financial year.

I found it incredibly surprising that in Farmers Weekly of October 2 last year we have the headline Beingmate ready to make money.

Not according to my research.

Fonterra chief executive Theo Spierings told us things were indeed rosy with Beingmate and its position in the Chinese infant formula market.

The further issue is that Fonterra proudly told us that it would receive $16m of dividends each year from its Beingmate shares.

An idle dream surely and so much for Beingmate being a cornerstone of Fonterra’s Chinese strategy and it being a game-changer in the Chinese market.

I was further surprised by the Fonterra chairman’s statement in the annual report that Beingmate’s troubles need to be interpreted in the context of overall milk markets in China.

“Beingmate’s performance, while very disappointing, is a reflection of China’s market conditions, which remain challenging for everyone in the infant formula market due to the impact of regulatory changes.”

I would also suggest it wasn’t the regulatory market that brought Beingmate down.

Then on January 22 we can read that Fonterra criticises Beingmate after extremely disappointing earnings downgrade.

Beingmate lost in the last calendar year somewhere between $171m and $214m.

“We are extremely disappointed by the announcement and the ongoing performance of the company,” Fonterra said in a statement.

That struck me from two sides.

The first was that the result, as I’ve pointed out, can hardly have been surprising to Fonterra. Credit Suisse was alluding to it months ago.

The second was the statement, Fonterra said.

That’s absolute rubbish. So now when days are dark we no longer have the chairman or chief executive making statements it is the co-operative.

Their spin is out of control.

So what are they going to do now?

They can’t sell their shares in Beingmate as they’re effectively worth nothing and who would buy them?

Trying to take the company over would be equally as disastrous.

Now Beingmate is blaming Fonterra for its losses in China, putting the co-op in an impossible position.

Fonterra hasn’t had a great run in China. It invested in 43% of Sanlu before the food contamination crisis.

It’s all on top of the $183m hit by Danone from the 2013 botulism scare, just from the Singapore case. The NZ litigation has yet to come.

I was intrigued to read a column asking who’s accountable for Fonterra’s multi-billion dollar mistakes.

It’s a fair question begging answers.

It tells us Fonterra was offered a 19.99% share in A2 Milk in 2013 that would have cost $60m.

On the current share price if the venture had gone ahead Fonterra shareholders would have had a capital gain of almost $1.4 billion.

Instead they wasted $755m on the dog that is Beingmate.

The is that Fonterra obviously didn’t do adequate due diligence on Beingmate.

So who is being held accountable?

The tragedy is that no-one is — be they management, board or the gold-plated rubber stamp, the Shareholders Council.

Instead, we have been subjected to what I would term dodgy spin over the Beingmate debacle which has been at variance with the views of respected economic commentators.

The Fonterra share price has tumbled from $6.66 to $6.29, a 6% drop in equity for all shareholders be they farmers or investors. Forsyth Barr has put a target on it of $6.20, lower than the current price.

Brokers I spoke to have suggested incompetent governance and management as a reason for not recommending shares.

Beingmate is proof of that incompetence at all levels.

Fonterra shareholders and indeed the country deserve better.