Fonterra executives say they have written off the Sanlu brand used by their Chinese joint venture into which they have poured $200 million of farmers’ funds.

“The Sanlu brand cannot be reconstructed,” Fonterra chief executive Andrew Ferrier told an Auckland press conference on Wednesday. “Sanlu has been damaged very badly.”

Fonterra said it has written off $139 million from its 43 per cent stake in Sanlu to reflect the cost of recalling poisoned product and Fonterra’s anticipated loss of brand value in the company.

The 69 per cent writedown leaves the book value of its investment in the remaining assets at an estimated $62 million, said Ferrier.

“How you reconstruct the assets is the key,” he said.

“We haven’t written off the assets because we think that there may be some way forward.”

Fonterra chairman Henry van der Heyden said the “impairment charge” had been recognised as required by accounting standards, “but we are certainly not putting the financial consequences ahead of our primary priority of consumer safety”.

“The scale of this tragedy has been truly shocking and our heartfelt sympathies go out to all the affected children and their families,” Van der Heyden said.

Government investigators have alleged that Sanlu received complaints about its milkpowder as early as December and knew of melamine contamination in June.

China State Council investigators found Sanlu “lied about its contaminated baby milk formula for eight months while tens of thousands of infants got ill”.

Separate sources have also said Sanlu imported special equipment in June to identify the contamination.

Fonterra today expressed surprise over the claim that Sanlu knew of problems in December.

Its Auckland-based executives said last week that their directors on Sanlu’s board were informed of the contamination on August 2, after receiving the first customer complaints in March.

“If this allegation proves to be correct, that would be absolutely appalling,” Ferrier said.

“If they were lying about it, then they were lying about it to us too.”

“If something did exist prior to that we’re shocked that it did and we obviously feel that if people were aware of it, it should have gone to the board”.

The chemical melamine was apparently added to milk supplied to Sanlu to cover up low protein levels after the milk had been watered down.

Sanlu was the biggest seller of infant milkpowders in China.

Another 21 companies have been found to have also had contaminated milkpowder, and melamine, used in making plastics and tanning leather, has also been found in milk and yogurt.

At least four children have died from drinking poisoned milk, and up to 53,000 children have been checked at hospitals after drinking contaminated milk.

Chinese Health Ministry officials have said 12,892 ill babies remain in hospital, with 104 babies still in serious condition. About 1579 babies have been “cured” and discharged.

Fonterra has previously said that it eventually envisages 10 per cent of its earnings coming from China, currently its fourth-largest market, and Ferrier said China remained a core part of Fonterra’s strategy.

Sanlu’s plants might be able to be restructured to play a role in that, Ferrier said.

The plants are now under the control of the Chinese Government, and shut down, and Fonterra is discussing their future with government officials.