Fonterra completes $45m Saudi deal

Dairy cooperative Fonterra says it has reached a final agreement to buy the 51 per cent stake it does not own in a Saudi Arabian joint venture for $45 million.

It intends to buy Jeddah-based Sadafco's stake in dairy manufacturing facility Saudi New Zealand Milk Products (SNZMP) in the deal, subject to regulatory approvals in Saudi Arabia.

SNZMP packed and processed more 30,000 metric tonnes of New Zealand milk a year for Fonterra and a small number of co-packing customers, Fonterra said today.

The deal would see Fonterra take full ownership of the factory, securing its current manufacturing capacity requirements for the Middle East, Africa and Commonwealth of Independent States region and allowing for further expansion and investment.

Fonterra Asia/Africa and Middle East regional managing director Mark Wilson said the acquisition was an important step in the growth of Fonterra's business in a large and growing dairy market.

The 20 countries in this region had 250m people and a dairy market value of more than US$5 billion ($6.93b).

"It is critical that we have long-term access to manufacturing capacity near these markets, to support our growth," Mr Wilson said.

The manufacturing site was first established by Fonterra and Sadafco in 1996, and had been managed by Fonterra since then.

It packs Anchor and Anlene milk powders and produces processed cheese and recombined feta-style white cheese for Fonterra.

With Saudi Arabia a signatory to the Arab Free Trade Agreement, products manufactured or packed by SNZMP were exported to the six Gulf Cooperation Council and 22 free trade agreement member countries free of duties.

"This provides Fonterra with a significant advantage over consumer dairy products that are simply imported into the region," Mr Wilson said.

"While we are increasing our geographic footprint and sales volumes, we are also focusing on growing a portfolio of added value products, such as speciality creams, jar cheese and feta-style cheese for consumers and the food service industry," Mr Wilson said.

Fonterra's earnings from the Asia/Africa Middle East region were up 19 per cent in the 2008/09 financial year, compared to a year earlier, while revenues were up 22 per cent.

- NZPA