Fonterra has cut its full-year guidance and will close a century-old factory in western Victoria amid drought conditions it says represent a "new norm for the Australian dairy industry".
The New Zealand-based processor on Thursday said its Dennington plant, which employs 98 people and opened in 1911, was "not viable" in current market conditions, and would be shut down later this year.
"This is not a one-off for this season, it's the new norm for the Australian dairy industry and we need to adapt," chief executive Miles Hurrell said in a statement.
Fonterra, the world's largest dairy producer, slashed its full-year guidance and said it expects earnings per share in the range of 10-15 NZ cents instead of its earlier estimate of 15-25 NZ cents.
The company informed Dennington workers of the decision on Wednesday and has reportedly told milk suppliers of a November closure date.
"The Australian ingredients business continues to feel the impact of the drought and other significant changes that mean there is excess manufacturing capacity in the Australian dairy industry," Mr Hurrell said.
"With the reduced milk pool in Australia, we must put it into our highest returning products and most efficient assets. Dennington is over 100 years old and not viable."
