Fonterra yesterday cut its earnings per share range for the 2017-18 year to 35c to 45c from 45c to 55c as a precautionary measure after the decision was released.
Speaking at a media conference, Mr Wilson said the arbitration tribunal did not fully recognise the terms of Fonterra’s supply agreement with Danone, including the agreed limitations of liability, which was the base on which Fonterra had agreed to do business.
He emphasised the decision had no effect on the forecast farmgate milk price.
However, Fonterra Shareholders Council chairman Duncan Coull said Fonterra farmer owners would ultimately bear the cost of the arbitration, a fact not lost on the Fonterra business.
The co-operative has made significant strides since the 2013 incident in terms of strengthening its operational processes, culture and governance and embedding them into its functions and framework.
The council was confident Fonterra was well placed to become the world’s most trusted source of dairy nutrition.
"As tough as this outcome is, the lessons learnt have enabled our co-op to emerge stronger and we now need to move forward together," Mr Coull said.
The arbitration followed events in August 2013 when Fonterra issued a precautionary recall advice to some customers who had been supplied with its WPC80 ingredient and products containing WPC80.
It was later confirmed there that had been no food safety risk to the public.
Both Fonterra and the New Zealand government conducted extensive reviews of the event. A follow-up review by the independent inquiry commissioned by the Fonterra board confirmed management acted in the best interests of its consumers and the co-operative at all times, Mr Wilson said.
"The decision to invoke a precautionary recall was based on technical information obtained from a third party which later turned out to be incorrect."
Although there was never any risk to the public, Fonterra had learnt from the experience and, as a result, it had made improvements to its escalation, product traceability and recall process, and incident management systems, he said.
"We operate in a fast-changing and complex industry and will always prioritise food safety and quality in our commitment to be the world’s most trusted source of dairy nutrition."
Fonterra chief executive Theo Spierings said the co-operative was in a strong financial position and able to meet the recall costs.He warned there were unlikely to be any challenges available to Fonterra. The decision was a 300-page document and Fonterra’s lawyers were "poring" over it.
Danone said in a statement the arbitration underscored the merits of its legal actions against Fonterra, including to champion the highest standards of food safety across the industry.
In April 2014, Fonterra had already been fined in the Wellington District Court for having breached several provisions of the New Zealand food safety regulations.
Danone said food companies and their suppliers could only work together through a solid relationship based on trust, transparency and accountability.
"Danone will continue to build that relationship with its suppliers across the world."
The High Court proceedings against Fonterra for breach of the Fair Trading Act 1986, negligent misstatement and product liability had been temporarily stayed pending the outcome of the arbitration.
Since Danone ended its supply contract with Fonterra, it had sourced product from Synlait Milk and other manufacturers, and bought two Kiwi dairy processing companies, Sutton Group and Gardians —the latter providing access to milk supply from 18 farms owned by Grant Paterson, of Dunedin.
Forsyth Barr broker Damian Foster said any amount to pay below $200 million was considered to be a good outcome for Fonterra. Commentary had suggested the potential liability could stretch up to about $1billion in a worst-case scenario.
"This has had little impact on the share price. If anything, it has removed a potential negative scenario."
Earlier, Fonterra reported an operating profit of $1.12billion, an operating cash flow of $1.4billion and free cash of $383million.
AT A GLANCE
• Fonterra ordered to pay $183million to Danone
• Earnings per share forecast cut
• Decision has no effect on farmgate milk price
• Brokers consider decision a good outcome, given the worst-case scenario
