Fonterra Australia said it will invest $141 million in building a state-of-the-art cheese plant at its Stanhope factory in Victoria to replace the previous facility, which was destroyed by fire last year.

The new, larger facility will make cheeses for Australian consumer, foodservice and export markets. Construction of the new plant will begin next year, and is expected to be completed in 2017.

A spokesman for Fonterra said the plant at Stanhope would will be self-funded and would not not increase its debt levels.

He said the funds would come from the A$74 million sale of Fonterra's sale of its stake in Bega last month, and by insurance payments for the damage from the fire and the loss of business.


Fonterra Oceania managing director Judith Swales said investing in the new plant would help Fonterra to deliver on its multi-hub strategy to get the maximum value out its milk and to drive increased returns from the business.

Swales said the company was delivering on its strategic plan to transform its Australian business and return it to strong and sustainable profitability.

"We are focusing on areas where we can win in a highly competitive market, and that means optimising our product mix and investing in higher value add products that will deliver the best returns for our farmer shareholders," she said in a statement.

The new will be able to produce 45,000 tonnes of cheeses each year including parmesan, gouda and mozzarella, an increase of 15,000 tonnes on the previous plant's capacity.

"As the branded market leader in the A$1.95 billion retail cheese category, with Bega, Mainland and Perfect Italiano commanding 23 per cent market share, the new plant will supply our Australian consumer and foodservice businesses, and export markets," Swales said. Construction of the new plant will begin next year, and is expected to be completed in 2017.