Dairy giant Fonterra says nothing has changed in its business to account for a slump in associated share funds to record lows.
The Fonterra Shareholders' Fund price fell as low as $3.45 on Thursday. Photo: Photo / AFP
The Fonterra Shareholders' Fund price fell as much as 8 percent on Thursday to a record low of $3.45, before recouping some of the drop.
Fonterra Co-op shares, which can only be traded between Fonterra supplier-shareholders, also fell heavily.
Fonterra's chief financial officer Marc Rivers said there was no explanation for the fall.
"The fundamentals of our business are strong; the world wants more dairy and we make great products.
"While the share price does not impact the co-operative's balance sheet or our ability to operate and pay our bills, it does impact our farmers' balance sheets," he said.
Investors cannot buy Fonterra shares. The shareholders' fund is a complicated investment fund based on dividends paid in by Fonterra shareholders.
Fonterra is reviewing its business to cut costs and reduce debt as part of a plan to turn around its performance after posting losses and large asset write-downs. It's aiming to cut debt by $800 million this year and reduce capital spending by $211m.
"Our performance is not where it needs to be. We are doing everything we can to turn that performance around and are undergoing a full strategy review. We know there are going to be some bumps along the way," Mr Rivers said.
So far it has sold its Tip Top ice-cream business for $380m and a stake in a German sports food company for a gain of $64m, as well as rationalising its Australian business. It's also reviewing its Chinese investments, and a Brazilian-based joint venture.
The share slump coincided with shareholders in the Westland Dairy co-operative voting to sell out to a Chinese dairy company for $588m because of the co-op's poor financial performance and debt burden.
Some sector commentators have said the problems which hit Westland pose the same threat to Fonterra.
However, analyst Arie Dekker of broking house Jarden Securities, said such a comparison was wide of the mark.
"Some misinformed commentary in recent weeks may also be having an impact on the share price with retail investors potentially spooked by some of this commentary," he said in a research note.