What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The co-op says extra capacity resulting from the upgrade will allow it to process an extra 500 million litres of Australian milk.
Fonterra chief executive Theo Spierings says its Australian business has been transformed – from a return of -8% return on capital a few years ago to 15% ROC.
“Our Australian business is now processing 2 billion litres of milk with a ROC of 11 to 12%,” he told the co-op’s annual meeting in Hawera today.
Fonterra’s Australian plants are running at full capacity, with a waiting list of suppliers.
“We are the largest milk processor in Australia right now,” says Spierings.
He says there have been developments in the Australian dairy industry; Murray Goulburn has been sold to Saputo and the deal needs shareholder approval and regulatory clearances.
Spierings says while other players will be seeking regulatory cleareances, Fonterra will not rest on its laurels.
“I have approved the $100m upgrade to be fast-tracked; $100m allowing us to process another 500m L of milk is a no brainer,” he says.
“We will drive the Australian business as hard as we can,” he says.
