Wednesday, 20 February 2019


GENERAL: FCG: Fonterra announces outcome of Danone arbitration

01 Dec 2017 13:55NZX
1 December 2017


The tribunal in the arbitration with Danone on claims arising out of
Fonterra''s WPC80 precautionary recall in August 2013 has issued its award.
The tribunal has determined that Fonterra must pay a total of NZD $183
million (EUR105 million) in recall costs suffered by Danone.

In reacting to the announcement, Fonterra''s CEO, Theo Spierings, said "We are
disappointed that the arbitration tribunal did not fully recognise the terms
of our supply agreement with Danone, including the agreed limitations of
liability, which was the basis on which we had agreed to do business."

Fonterra has assessed the potential financial implications of the decision
and made a prudent decision to revise its forecast earnings per share range
for the 2017/18 financial year to 35 to 45 cents, down from 45 to 55 cents.

The decision has no impact on the forecast Farmgate Milk Price.

The arbitration followed events in August 2013 when Fonterra issued a
precautionary recall advice to some customers who had been supplied with its
WPC80 ingredient and products containing WPC80. It was later confirmed that
there had been no food safety risk to the public.

Both Fonterra and the New Zealand Government conducted extensive reviews into
the events. A follow-up review by the Independent Inquiry commissioned by the
Fonterra Board of Directors confirmed that the Co-operative''s management
acted in the best interests of its consumers and the Co-operative at all

"The decision to invoke a precautionary recall was based on technical
information obtained from a third party, which later turned out to be

"While there was never any risk to the public, we have learned from this
experience and as a result have made improvements to our escalation, product
traceability and recall processes, and incident management systems.

"We operate in a fast-changing and complex industry, and will always
prioritise Food Safety and Quality in our commitment to be the world''s most
trusted source of dairy nutrition.

"Fonterra is in a strong financial position and is able to meet the recall
costs," said Mr Spierings.

The Co-operative was reviewing the tribunal''s findings closely, but
recognised that there was likely to be limited options for challenging the
decision of an international arbitration.


Anya Wicks
Company Secretary

For further information contact:
24-hour media line
Phone: +64 21 507 072
End CA:00311283 For:FCG    Type:GENERAL    Time:2017-12-01 13:55:05
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