San Lu baby milk products have been recalled in China after being found to be laced with deadly chemicals, which have led to the loss of numerous lives.

Fonterra says it first learned of the contamination in early August and worked with the Chinese authorities on a product recall.

But that has not been enough to quell the anger both in China and in New Zealand that the company did not do enough to prevent the disaster.

Now Fonterra is feeling the pain on its bottom line, today announcing that as a direct consequence of the criminal contamination of milk in China, it will cop an impairment charge of $NZ139 million against the carrying value of its investment in San Lu.

This reflects the cost of the product recall and Fonterra's anticipated loss of San Lu brand value.

Following this impairment charge, Fonterra's best estimate at this point in time, of the book value of its investment in San Lu is approximately $62 million.

"We have recognised this charge as we are required to by accounting standards, but we are certainly not putting the financial consequences ahead of our primary priority of consumer safety," Fonterra chairman, Henry van der Heyden said.

"We are focusing all our efforts on what Fonterra can best do to work with the Chinese authorities and help get safe dairy products to Chinese consumers.

"Throughout this crisis, Fonterra's paramount concern has been for the health and safety of Chinese consumers and recalling contaminated product as quickly and effectively as possible in the Chinese environment.

"The scale of this tragedy has been truly shocking and our heartfelt sympathies go out to all the affected children and their families.

"The latest revelations that an official Chinese Government investigation has revealed San Lu management was investigating complaints of sick infants as early as eight months before the San Lu Board and Fonterra were first informed on August 2 is deeply concerning.

"That Fonterra was not informed earlier is frankly appalling."

Fonterra has also cut its projected milk prices, and its share dividends as a result of both the San Lu tragedy and the financial instability on global markets.