Chinese firm plans $210m milk plant in NZ

Yashili wants to process finished and semi-finished products, including base milk powder, in New Zealand. Photo / NZH

Yashili International Holdings, which manufactures and distributes infant milk formula products in China, is the latest Chinese company looking to invest in New Zealand, with plans to build a 1.1 billion yuan ($210 million) processing plant.

The Chaozhou City, Guangdong-based company's board signed off on a project to set up a manufacturing facility in New Zealand to process up to 52,000 tons of finished and semi-finished products including base milk powder by the second half of next year, according to a statement on the Hong Kong Stock Exchange. Yashili currently sources most of its raw milk from New Zealand.

The company will spend 950 million yuan on acquiring land and building the plant, and a further 150 million yuan as working capital for a New Zealand subsidiary.

The local unit, Yashili New Zealand Dairy Co, was incorporated in July last year according to Companies Office records and has entered into a conditional agreement to buy land where the facility will operate. The acquisition is subject to certain conditions, including approval from the Overseas Investment Office.

The investment comes a month after China's Inner Mongolia Yili Industrial Group flagged plans to spend some $214 million buying and upgrading Oceania Dairy Group's South Canterbury milk powder plant.

Chinese investment in New Zealand has been a heated topic in recent years after bids to buy large tracts of farm-land forced the government to announce a U-turn on its plans to free up overseas investment and a High Court ruling made the OIO impose a more rigorous analysis of foreign purchases.

Yashili was set up by brothers Zhang Lidian and Zhang Likun in 1998 and is ultimately controlled by the Zhang family. US private equity firm Carlyle Group bought a stake in the Chinese company in 2009 to ramp up its research and production, and raised HK$2.7 billion when it floated a minority share in Hong Kong the following year.

The shares gained 0.4 per cent to HK$2.38 in trading yesterday, and have almost doubled in the past 12 months.

Chairman Zhang Lidian is on the Chinese committee of the International Dairy Federation, and serves as a representative for the Guangdong province in the National People's Congress, according to Yashili's website.