Natural Dairy pressing ahead with milk export plans

Natural Dairy intends to keep pursuing dairy business opportunities in New Zealand. Photo / Bay of Plenty Times

The Chinese company that sparked a fierce national debate last year about foreign investment in farming is ploughing ahead with plans to export millions of cartons of UHT milk from New Zealand to China.

In a 19-page statement to the Hong Kong Stock Exchange, Natural Dairy has disclosed it has decided not to ask for a judicial review of a government decision just before Christmas to reject its bid to buy 16 farms previously owned by the Crafar family.

The company has acknowledged it may have to surrender a further four farms it already bought from the Crafar family a year ago. But it says it will continue to "seek and pursue" dairy business opportunities in this country through its New Zealand subsidiary "or other means".

Natural Dairy has given itself a new deadline of September 30 to come up with a fresh proposal. Meanwhile, it has begun a high-profile advertising campaign for its New Zealand milk on Chinese television channel CCTV.

Three weeks ago, it handed over a $20 million deposit to a company previously linked with bankrupt businesswoman May Wang for 40 million packets of UHT milk it plans to sell in China.

Natural Dairy had hoped to get the milk to China by January, but its plans have been delayed by hiccups in getting a milk-processing plant running in a former pet food factory in Tauranga.

Wang was originally responsible for the project, but last month resigned from the New Zealand companies that are dealing with Natural Dairy.

She has been replaced by three new directors: a long-time associate, Malia Po'uhila, Titirangi accountant Murray Hunter (well known as a frequent contributor of letters to the editor in many New Zealand publications) and Linling Xie.

As of last week, the Tauranga plant had managed to send only sample batches to China. But according to Natural Dairy, it expects to receive about 38 million packets of the ultra-heat-treated milk within the next couple of months. It is understood that because of the delay, the packets will be sent by air, rather than sea, adding to their cost.

Natural Dairy originally hoped to sell at least 150 million packets of the milk to Chinese consumers by October this year.

It is unclear whether it will be able to source enough raw milk to achieve its ambitions. The collapse of the Crafar deal means it will have to buy milk from its rival, Fonterra, in the interim.

Meanwhile, the company has outlined to its shareholders what has happened to the HK$1.5 billion ($249 million) it raised from Asian investors last year for its ambitious plans.

While much of the money has been paid to various subsidiaries in China which will distribute the UHT milk, it claims it also spent HK$29 million setting up a Chinese newspaper in Auckland, the United Daily News. Of that, $600,000 was spent on an office for the newspaper. The Business has previously reported that the office, on Auckland's Queen St, was owned by May Wang. (It is understood the newspaper has since folded.) According to Natural Dairy, it also handed over HK$552 million to a company associated with Wang, most of which was given to the lawyers for the receiver of the Crafar farms. But according to the company, Wang kept HK$57 million.

Natural Dairy gives no explanation for the payment and says it is still considering how it will receive "adequate value" for the money, given that the Crafar deal has since fallen over.

It is also uncertain what will happen to millions of dollars worth of shares in Natural Dairy that were transferred to Wang last September.

Natural Dairy says it decided to halt the transfers after the Hong Kong Stock Exchange raised concerns about the transactions. Wang's company had already sold some of the shares and those transactions have also been frozen. The shares remain in limbo at Computershare in Hong Kong.

Natural Dairy shareholders, who include some of China's wealthiest tycoons, have been prevented from selling shares for most of the past year.