Fonterra responds to rating downgrade


Standard and Poor’s has downgraded Fonterra’s credit rating from A to A-, but the dairy giant specified that the revised rating will not affect its strategy or the farmer shareholder payout.

“Our underlying financial strength and credit quality remain strong,” said Fonterra’s chief financial officer Lukas Paravicini, adding that S&P maintained their rating in the A category, which means that the agency still had a very positive view on Fonterra, remaining one of the highest credit rated companies in the agri-business sector.

Nevertheless, it has been noticed that the Cooperative’s financial risk profile had weakened in the past two years, as its capital spending and large debt funded acquisition coincided with a high level of volatility in the global dairy market. “We are disappointed that Standard and Poor’s has not reconfirmed its rating from April, especially when global dairy prices have significantly improved and we have continued our strong financial discipline,” said Paravicini. This included capital investment management, setting a prudent advance rate payment to farmers for the current season. 

Paravicini underlined that Fonterra’s investment strategy is making the Co-operative stronger and well positioned for the future.