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One of Europe’s biggest dairy companies, FrieslandCampina, is facing a paper loss of up to €46m from its holdings in China Huishan Dairy, the financially stressed company whose shares on Hong Kong’s exchanged suddenly plummeted 90 percent last week.

The Dutch company formed a joint-venture with Huishan in 2015 as part of a deal for greater access to China’s vast baby formula market, which saw it buy $30m worth of shares in its Chinese partner. FrieslandCampina also paid $700m for half of Huishan Dairy’s Xiushui plant in the city of Shenyang, write Tom Hancock, Sherry Ju and Jennifer Hughes.

The company valued the stake at €53m as of December 31st, since when Huishan’s shares have fallen 86 per cent – all of that on Friday. At current prices, that implies the Dutch group has lost €45.6m.

“FrieslandCampina is closely monitoring the situation and will, if necessary, take appropriate action to ensure successful continuation of the joint venture’s activities in the Chinese market,” the company said in a statement to the Financial Times.

Huishan suspended trading in Hong Kong on Friday after its shares suddenly slumped. The company confirmed on Tuesday that it had met with almost two dozen creditors after failing to make interest payments, adding it it had lost contact with the head of its treasury operations.

FrieslandCampina was the world’s sixth largest dairy company last year, according to Rabobank, with a milk-related turnover of $12.3bn. Other European dairies have also bought into their Chinese counterparts, with Danone owning a more than 10 per cent share in Mengniu, its joint venture partner in China.

Copyright The Financial Times Limited 2017. All rights reserved.
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