(Yicai Global) Aug. 7 -- New Zealand's Fonterra Co-operative Group plans to sell its stake in Beingmate Baby & Child Food via the stock market after failing to find a buyer for the Chinese baby food maker whose losses over several years now top CNY1 billion (USD142 million). Based on Beingmate's current stock price, Fonterra will take a huge loss.

Fonterra bought 18.8 percent of Beingmate for CNY3.5 billion (USD496.8 million), or CNY18 (USD2.60) a share, in 2015, becoming its second-largest investor. The shares [SHE:002570] reached a high of CNY31 each in June 2015. After Fonterra's announcement today, they closed at CNY5.11, a 3.4 percent gain.

"We have talked to a number of parties regarding the potential sale of our entire stake in Beingmate, but so far have been unsuccessful in finding a buyer," Fonterra CEO Miles Hurrell said in a statement posted on its website.

Under Shenzhen bourse rules, Fonterra is only able to sell up to 1 percent of the stock directly on the exchange every 90 days or sell up to 2 percent in a single block every 90 days. But trades greater than 5 percent can be made to an individual party in an off-market transaction, Hurrell added.

No Cash Cow

Fonterra described its relationship with Beingmate as "disappointing." Beingmate's performance disappointed because of surging competition in China's dairy sector. The Hangzhou-based company lost CNY781 million (USD111 million) and CNY1.1 billion in 2016 and 2017, respectively. It has been forced to flog real estate assets to preserve a semblance of profitability to avert delisting.

Auckland-based Fonterra, which is New Zealand's largest company, failed to make a return on its investment. Instead, it was forced to write off NZD35 million (USD22.4 million) in 2017 and NZD419 million in last year because of its stake in Beingmate.

China remains Fonterra's largest and most important market, earning CNY18 billion here last year. It even introduced fresh milk products in China in April. Its Anchor ultra-high temperature processed milk continues to sell the most both online and offline among imported milk brands. Its Anchor-brand skim milk is the best seller in the category and doubled its growth in this year's first half.

"One aspect of this plan was to take stock of our business," Hurrell explained, adding, "as part of this, we have re-evaluated every investment, major asset and partnership to ensure they still meet the co-operative's needs today."

"What remains is our shareholding in Beingmate Baby & Child Food, which we now view as a financial investment only."

Editor: Ben Armour