'Disappointing but not unexpected': Fonterra boss on credit downgrade

Fonterra CEO Miles Hurrell is disappointed at the move by ratings agency Fitch to downgrade the dairy co-op's rating outlook, but said it was not unexpected.

The international ratings agency downgraded the outlook on Fonterra's 'A' long-term issuer default rating to 'negative', from a previous 'stable' outlook. 

It said last week's earnings downgrade indicated that Fonterra is facing structural issues that it needs to deal with if it wants to keep the defensive traits protecting its business profile

Fonterra recently announced that it was slashing its earnings forecast and would not be paying an interim dividend.

Fonterra CEO Miles Hurrell told Magic Talk's Ryan Bridge that he was very disappointed, but the move wasn't unexpected.

"Our performance isn't where it needs to be," he said.

"We have our plans, which we are part-way through around reducing debt and reducing expenditure, hence our earnings guidance change," said Mr Hurrell.

The co-op is currently reviewing assets in an effort to reduce debt, however he said asset sales would not be enough.

"We need to see a fundamental change in direction."

"We need to do things differently from where we have been. We are starting on that journey with the board and will start to have a look at what that looks like shortly."

"The short term pieces around debt and operating expenditure is not enough to get us where we need to be."

Meanwhile Mr Hurrell confirmed that there are a number of potential buyers for ice-cream company Tip Top.

"We have appointed bankers to work through that process, and we will have final discussions in the coming months."

Fonterra is due to announce its half-year results on March 20.