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While the loss was not unexpected, it appears likely analysts will next consider financial forecast downgrades, and the current forecast farm-gate milk price is likely to come under pressure in the months ahead.
Fonterra is starting a "strategic review" of Chinese company Beingmate, whose repeated underperformance and losses have caused much of the problem.
A fortnight ago Fonterra downgraded its 2018-19 forecast farm-gate payout to $6.75 per kg of milk solids and shares earnings in a range of 25c-35c, which it maintained yesterday. A $5-per-kg payout is considered breakeven.
The co-op yesterday confirmed a 2017-18 final farm-gate payout of $6.69, and limited its dividend to 10c, already paid in April.
Fonterra interim chief executive Miles Hurrell said business performance had to improve.
"In full-year 2018, we did not meet the promises we made to farmers and unit-holders," he said.
Last year Fonterra posted a $745 million profit, but after it wrote down a Chinese investment and paid reparation to a French dairy company, it booked its first ever half-year loss - of $348 million - in March.
That loss was from its $405 million write-down of its 18.8% investment in Chinese infant milk formula company Beingmate, plus the $183 million settlement with Danone, following their dispute over the 2013 whey protein recall.
Fonterra spent $755 million acquiring its Beingmate stake in 2015.
Forsyth Barr broker Damian Foster said the full-year result was "slightly below" his and market expectations.
While Fonterra had noted several factors impacting the poor result, it outlined a three-point plan to improve performance.
"While we await further detail on the strategy, at face value it appears sensible, given the mixed success FSF [Fonterra Shareholder Fund units] has had in its investments since listing," he said.
Mr Foster said he had expected earnings per share for full-year 2019 of around 40c, but Fonterra's guidance was 25c-35c.
"We expect to make downward revisions to current forecasts."
Craigs Investment Partners broker Peter McIntyre said it was a "horrible full-year 2018" for Fonterra, which ended its year with net debt high, as expected, at $6.2billion and a debt ratio of 48.4%.
Capital expenditure was lowered to $650 million, against Craigs' expectations of $800 million, and Fonterra was targeting debt gearing to revert to a 40%-45% range, he said.
Mr McIntyre said while Fonterra's earnings outlook signalled a further downgrade, the market should take comfort in the "reset of expectations", and decline in capital expenditure.
For its year to July, Fonterra's normalised sales revenue was up 6% at $20.4billion, normalised interest before interest and tax was down 22% at $902 million and after-tax loss was $196 million.
Fonterra's return on capital declined from 8.3% a year ago to 6.3%, while its debt gearing ratio rose from 44.3% to 48.4%.
Mr Hurrell said even after allowing for the Danone payment and Beingmate writedown, which collectively accounted for 3.2% of the increased debt gearing, Fonterra's performance was still down on last year.
Chairman John Monaghan said full-year 2019 was "about lifting the performance of our co-operative.
"You can expect to see strict discipline around cost control and respect for farmers' and unitholders' invested capital. That's our priority."
On the three-point plan, Mr Hurrell said forecasting had to be more accurate.
"It [forecasting] will also be clear on its assumptions, so farmers and unit-holders know exactly where they stand and can make the decisions that are right for them and their businesses," he said.
Federated Farmers dairy chairman Chris Lewis described the result as "very disappointing".
He said farmers and shareholders would be looking for the new chief executive and chairman "to hit the ground running".
He said yesterday's forecast earnings per share of 25c-35c should be considered a minimum.
Fonterra shares closed yesterday up 4c at $5.01.