MENU

Aussie dairy stocks jump in response to NZ contamination

New Zealand’s largest diary company Fonterra (ASX: FNF) has been rocked by a quality issue involving three batches of its whey protein concentrate. The affected whey contains a strain of Clostridium which has the potential to cause botulism. Amazingly, the contaminated whey was manufactured back in May 2012, but was only first identified as having a potential quality issue in March 2013 and only in recent days was the alarm raised.

The whey concentrate is used by Fonterra’s customers in the manufacture of a number of products including infant formula, milk powder and sports drinks and with customers located in numerous countries, so the task faced by management to contain this issue is significant.

With the potential for customers and countries to halt use and importation of Fonterra’s products, near term losses of revenue and earnings are very real.

The Australian listed units of Fonterra dropped over 7% in early trade following the announcement. Meanwhile shares in Fonterra’s Australian-based competitors Bega Cheese (ASX: BGA) and Warrnambool Cheese & Butter Factory (ASX: WCB) — who could benefits from increased orders due to Fonterra’s contamination problems — were up 2% and 3.5% respectively.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading


Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.