New Zealand dairy giant Fonterra plans to try and raise CNY300m (US$42m) through a bond issue in Hong Kong.
The company said today (17 June) that the move marks the first time that Fonterra has issued debt denominated in Chinese renminbi, and the first Australasian corporate to tap the CNH market. CNH is defined as Chinese yuan deliverable in Hong Kong.
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Fonterra China president Philip Turner said the funds raised from the CNH bond issue would be used to support the growth of the company’s local business, based in Shanghai.
He said: “Fonterra is growing very fast in China. We already have an established history working with local customers in China to grow and develop the dairy industry. We see huge potential to expand the breadth of products we offer in China, as well as the geographical distribution of our consumer brands and foodservice dairy products.”
Turner said Fonterra forecasts show the China dairy market is on track to triple in value from around $22bn in 2009 to $70bn by 2020.
The Fonterra executive explained that the company is developing its farm business in China and will also expand the distribution of its consumer brands from seven cities to more than 15 cities in the country over the next three years. It is rapidly expanding distribution of its foodservice products into tier-two and tier-three cities in China.
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By GlobalData“We are also exploring opportunities to produce and sell a range of premium value-added dairy ingredients for key customers on the ground in China,” Turner said.
Stephan Deschamps, Fonterra’s treasury general manager, said the decision to enter the CNH bond market reflected the growing importance of China to Fonterra’s business operations. “As our business with Chinese customers expands, it makes sense to seek a greater alignment between our Treasury borrowing and our business activities.”
The CNH market has grown significantly over the past year, reflecting the importance of China and its currency in the world economy and trade, he added.
Deschamps said the bond issue represents a further diversification in Fonterra’s Treasury strategy. Fonterra already has debt denominated in US dollars, New Zealand dollars, the euro, sterling and Japanese Yen.
