27 Aug 2014

Fonterra in big joint venture with China

8:30 pm on 27 August 2014

Fonterra is planning to invest $1.17 billion in a Chinese joint venture and in boosting its processing capacity in New Zealand.

At the same time, the dairy cooperative is sticking to its forecast milk payout of $6, plus a dividend of between 20 and 25 cents a share.

Primary Industries Minister Nathan Guy.

Primary Industries Minister Nathan Guy. Photo: RNZ

About $615 million will be invested in a new joint venture with Chinese baby food manufacturer Beingmate to help meet that country's growing demand for infant formula.

It will also take a stake of up to 20 percent in Beingmate, subject to regulatory approval, and if that is given, the joint venture will buy the state-of-the-art Darnum formula processing plant in Australia.

To satisfy Chinese regulators, Beingmate will own 51 percent of the joint venture.

Primary Industries Minister Nathan Guy said today the deal with Beingmate is good news for New Zealand and will give Fonterra greater access to the China market.

"They've got a very strong reputation, they've got the distribution links. And there's huge opportunities in the China market for Fonterra to expand in volume also in value as well."

Local plants boosted

Local investment by Fonterra also announced today is expected to increase the company's milk processing capacity by 10 percent.

This includes a $400 million investment at its Lichfield plant in South Waikato on a high efficiency milk powder drier and about $160 million spent at its Edendale factory in Southland.

Fonterra chairperson John Wilson said the investment will give the company more options in the products it can export.

"This is very good for providing flexibility for Fonterra. It gives us a better chance of being able to maximise the returns to our farmers.

"And, very importantly, providing jobs in these regions - particularly around Litchfield and in Edendale - not only for the build of these plants, but going forward."