Beingmate has downgraded its earnings guidance for the year ended December and now expects a loss of between $171 and $214 million.
Fonterra bought an 18.8 percent stake in Beingmate for $754m in 2015.
That investment has weighed on its earnings, with losses and a writedown in the asset’s value in the past financial year.
In a statement, Fonterra said it was extremely disappointed by the earnings downgrade and the poor performance of Beingmate.
“We are seeking more information on the forecast downgrade in addition to receiving Beingmate’s full year financial statements,” the statement said.
“We will consider the financial implications on our investment for the purposes of our upcoming interim financial results.”
Some directors of Beingmate have questioned parts of the company’s financial management and reporting practices, but Fonterra said it was sticking by its investment.
“The Chinese market is growing rapidly and within five years, forecast demand for infant and baby dairy products will be more than the total for other global markets, so the potential remains.”
Fonterra refused to comment further.