Fonterra remains intent on Chinese expansion, despite recent knocks to companys reputation

Fonterra remains intent on Chinese expansion, despite recent knocks to company's reputation

Fonterra has announced it has raised CNY1.25bn (US$206.6m) from its second bond denominated in Chinese currency to help fund the growth of its business in China.

The five-year so-called "dim sum" bond issue will be used to finance Fonterra's growth across the supply chain, the New Zealand dairy giant said.

"Along with refinancing some of our existing China operations, we will also be using funds to support further growth in this market. This will include the further expansion of our consumer, foodservice and farming operations," CFO Lukas Paravicini said.

In September, Fonterra unveiled details of its second large-scale "farm hub" in the country as it pushes ahead with its strategy to produce 1bn litres of milk in China by 2020. The company is moving to develop a safe supply of raw milk in China by investing in opening company-owned farms in the country.

However, Kelvin Wickham, president of Fonterra's business in Greater China and India, said the company's consumer brands division are "a key focus for growth, given it is at an earlier stage of development".

"Last year we successfully launched our premium milk brand, Anchor, and also launched a new paediatric formula product specially tailored for the China market under the Anmum brand," Wickham said.

However, Fonterra's reputation in China has taken a blow in recent months. Last year's recall of whey powder concentrate over fears it was contaminated with a bacteria that can cause botulism led to product recalls for Fonterra's customers in China including Danone and Abbott Laboratories. It also led Beijing to temporarily ban Fonterra products from entering China.

Last week, Fonterra recalled fresh cream sold under its Anchor and Pams brand in New Zealand after tests indicated products could be contaminated with E.Coli.

China's General Administration of Quality Supervision, Inspection and Quarantine warned consumers not to consume Fonterra cream that may have been sent to them in the mail - even though the short shelf life, chilled product was not directly on sale in the country.