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Chinese Company Invests In $200Million NZ Dairy Plant
July 28, 2016

A state-owned Chinese company is investing in a Southland company to build a $200 million dairy processing plant with the promise of creating 100 new jobs.
Mataura Valley Milk has announced China Animal Husbandry Group (CAHB) will have a 71.8 per cent stake in the plant, 20 per cent will be held by Southland farm suppliers and the remainder by Hamilton-based milk powder company BODCO and Mataura directors.

The new plant, which is yet to be built, will manufacture infant formula, ultra-high temperature (UHT) cream and small amounts of skim milk powder. CAHB’s investment in Mataura Valley Milk was approved by the Overseas Investment Office as well as the Chinese Government.

Based in Beijing and in operation since 1982, CAHB produces veterinary medicines, feeds, feed additives, herbages, milk powder, whey powder, pet food, and seeds. It has annual revenues of $1.6 billion and more than 10,000 employees, and wholly or partially holds ten subsidiary companies operating inside China. BODCO, run by businessman Gary Mollard, already sells infant formula brands in China and is partially owned (40 per cent) by CAHB.

The plant, which is to be built just north of Gore on State Highway 1 starting in October, was first mooted in 2008, but with a different management and investment set up. Development was hit by the global financial crisis. Of the promised jobs, 60 would be created in Gore and 40 in the BODCO business in Hamilton. Gore resident and Mataura director Aaron Moody said the plant was designed to tap into the growing global demand for nutritional powders, especially infant formula.

Moody is a son-in-law of the former Mayor of Gore, Ian Tulloch, who became the largest Mataura shareholder in 2009 and remains as a director.

Moody said the farmer suppliers had not yet provided any capital for the plant, which has received consent from the Gore District Council. Investment was being provided by CAHB, BODCO and Mataura Milk.

He did not say which company the farmers were currently supplying.

Federated Farmers spokesman Allan Baird said they were likely to be Fonterra suppliers because they would be cashed up after selling their shares. Open Country was the other player in the district, but less significant.

Baird said he was cautious over the proposal.

“I’m concerned about the high level of offshore investment, I would have preferred to see it sourced more from local funding.” There was also “plenty of stainless steel” in Southland, with Fonterra’s Edendale drying plant not working to full capacity.

Gore District mayor Tracy Hicks said news of the plant was “massive” for the district, and would inject an estimated $90m into the local economy. “It’s fantastic to see this investment opportunity come to fruition. We haven’t seen that kind of investment here for a very long time,” he said.

Moody said most of the products from the plant were destined for the China-Asia market, although the company did not want to be totally dependent on one region.

“The global infant formula market was worth $57b in 2013, and the market in China alone is expected to reach $38b by 2017,” he said.

CAHB was currently importing some infant formula from New Zealand. It was able to offer a distribution network throughout China.

Asked if he was concerned about the risks of dealing with a Chinese partner, Moody said there was risk in any market.

“The relationship with CAHB provides us the confidence to proceed with the plant and excellent access to the rapidly growing demand in the Chinese market.

“At the same time, 20 per cent of the company will be held by Southland dairy farmers who have the ability to meet Mataura’s raw milk and quality requirements, enabling them to be part of a value-added business operating at the premium end of the market.” Moody said.

Invercargill Mayor Tim Shadbolt was delighted the project had found investors.

Despite the new plant being in the Gore district, the Southland and Invercargill districts were bound to prosper because of the interdependent nature of the region, he said.

“When one benefits, in a way we all indirectly benefit.” Southland Mayor Gary Tong echoed Shadbolt’s comments, saying it would assist the Southland region. “It’s another industry in Southland that will be for the benefit of employers and the greater good of New Zealand.”

By: Gerard Hutching
Source: Stuff.co.nz



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