Fitch lowers Fonterra view to negative

Fitch Ratings said it revised the outlook on Fonterra Co-operative Group Ltd. to negative from stable and affirmed the long-term issuer default rating at A.

The outlook revision follows Fonterra's reduction of its forecast earnings for the financial year ending July 2019, Fitch said.

The agency said this indicates that the co-operative has structural issues that need to be addressed to retain the defensive traits that have underscored its historically strong business profile.

The co-operative attributed the decline to challenges in its ingredients business in Australia and foodservices businesses in Asia, Fitch said, as well as difficult trading conditions in Latin America.

The company's announcement that it will not pay an interim dividend and will consider its dividend policy moving forward is a positive development for bondholders and continues to reinforce an expectation that Fonterra will prioritize the strength of its balance sheet over payments to farmer shareholders, the agency said.

The ratings also reflect the volatility in the dairy market and other industry issues in specific geographic regions, Fitch said.

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