Eroding share of milk worries Fonterra shareholders
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
A resource consent application to build the purpose-built spray dryer, referred to as D7 – which also includes new batching equipment, high specification mixing equipment, additional warehousing, another laboratory and a 25kg packing line – is underway with the Westland District Council.
Chief Executive Rod Quin says the company is confident the consent will be granted with conditions to meet any local concerns around noise, traffic and air discharge.
Westland has a strong history of producing high quality milk powders and butter," Quin says.
"But we have made a strategic decision to shift the balance of our production toward high-end nutritional products, such as infant formula. Nutritionals consistently deliver higher margins than milk powders and will lead to relatively higher pay-outs for our shareholders as well as placing Westland on pathway to a more secure and sustainable future."
Quin says the D7 investment will create up to 36 new jobs in Hokitika, and local contractors will be used as much as possible in the build.
"The project equates to a significant investment in the West Coast economy," he says. "Not just from work that will go to local firms, but also long term because of the increase in permanent jobs and the anticipated additional income it will generate for our suppliers."
The investment in D7 will build on the capability and commercial success of the upgrade to Drier Six (D6) last season, Quin says. "The demand for nutritional products continues to grow; and, while China is a key market for these products, we also have significant contracts in South East Asian markets and Australasia that broaden our customer base. Many of our current customers are expected to increase their purchases as a result of this project."
D7 will allow Westland to produce an additional 23,000 metric tonnes of nutritional product per season.
Westland's board has approved funding for the project from a combination of debt and retentions. The company has engaged the expert services of Babbage Engineers as project managers and the plant will be built by Tetra Pak. It is expected to be commissioned in August 2015 and generate sales of $115million per year when at full capacity.
The approval for D7 comes on top of a series of investments by Westland including the D6 dryer last season, a new boiler at Hokitika and investigations into a possible milk processing plant at its Rolleston site.
