Fonterra share value cut 20pc

Fonterra has cut its estimated fair value share price by 20 percent, or $1.10, to $4.47 due to the "unprecedented" turmoil in world equity and financial markets and the write-off of its $200 million investment in China's San Lu reports NZX. The cut, for the 2009-10 season, follows a $1.22 decline in the previous season. Fonterra chairman Henry van der Heyden also said the tough global economic outlook was a factor in the reduction to the estimated fair value share price. Fonterra said its independent valuer, Duff & Phelps, provided it with a valuation range of $4.14 to $4.80 and the estimated price is the mid-point of that range. The valuation also assumes a full write-off of Fonterra's 43% stake in San Lu following the China milk contamination crisis. Fonterra says this is likely to happen in its next financial statements. In September Fonterra said it had taken a 69%, or $139 million, write down on its investment in San Lu which at that point left its stake worth about $62 million. Fonterra requires farmers to own shares equivalent to their milk production. The final fair value share price for the 2009-10 season must be set by Fonterra's board by June 1, 2009, with farmers needing to settle their shareholding obligations in July 2009.