Dairy Farm International Holdings, the retail arm of Jardine Matheson Holdings, yesterday said it had agreed to sell out of its last manufacturing operation to concentrate on its core retail businesses.
The company will dispose of its remaining 49 per cent stake in dairy products manufacturer Nestle Dairy Farm to Nestle of Switzerland for US$40 million cash.
The Nestle Dairy Farm joint venture was set up in 1992 when Nestle, the world's largest food-maker, bought a 51 per cent stake in Dairy Farm's dairy manufacturing business.
Nestle Dairy Farm has struggled over the past two years due to too rapid expansion on the mainland and an inventory build-up caused by over-anticipating demand.
Analysts said the joint venture had been a classic example of foreign investors' over-enthusiasm for the mainland.
Dairy Farm suffered a loss of $7.9 million from its share of the business last year, and by selling now will escape what analysts believe may be three more years of losses.
Dairy Farm finance director Edouard Ettedgui said the decision to sell the remaining stake was to enable the company to concentrate on its food retailing and convenience store operations.