Fonterra faces court battle

LAURA WALTERS
Last updated 16:04 02/12/2013

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Fonterra could be facing a court battle with French dairy giant Danone following the fallout over damages from the botulism contamination scare.

Fonterra chief executive Theo Spierings told unitholders at today's Fonterra Shareholders' Fund meeting that attempts to settle compensation claims with Danone out of court had failed.

In October, Danone said it was asking for more than €200 million ($331.9m) from Fonterra in compensation over the botulism contamination scare.

A Danone spokeswoman told Fairfax Media in October the money represented an estimation of "the immediate costs" to Danone when it had to recall baby formula products in eight markets after Fonterra's botulism alarm in August. The scare turned out to be a false alarm.

In October, Danone estimated overall damage to its 2013 year baby food sales from the botulism alarm was $564 million.

A unitholder asked Spierings whether the $14m Fonterra had put aside to deal with claims related to the fallout of the contamination scare was enough.

Spierings said it had already dealt with six of the eight companies affected by the product recall.

Fonterra had worked "very very hard for months" on reaching a settlement with Danone, Spierings said. "It appears to be a route that's not working out. There's only two ways you solve it: commercially or you go legal,'' he said.

Spierings said legally Fonterra did not have any liability if the dispute went to court.

"But that could take time if it goes the legal route," he said, adding that Fonterra had not yet dipped into the $14m contingent liability.

The company was also ''very close'' to reaching a deal with another nutritional company affected by the scare, he said.

The deal would include extending a contract with the unidentified company from two years to 10 years, he said.

More volume would be added to the contract and therefore more value would be generated through the deal, he said.

After the extra value had been added the companies would have to decide who got what, Spierings said, adding that the deal was not a "haircut".

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- BusinessDay.co.nz

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