120 jobs on the line as Fonterra plans closure of Hamilton Canpac site

Fonterra's Canpac factory in Hamilton.

• Fonterra plans to close Hamilton canning and packaging site in July.
• About 120 staff work at the site.
• Fonterra wants to focus on higher-value ingredients than currently handled at the site.

Dairy giant Fonterra has today announced it plans to close its Hamilton canning and packaging facility in July, with about 120 jobs on the line.

Fonterra said the closure of the Canpac site followed the co-operative’s decision to focus on higher value ingredients, such as advanced proteins and medical nutrition.

The site is currently used to blend and package milk powders.

Fonterra chief financial officer Anna Palairet said low product volumes and increasing complexities in production had created challenging economic conditions for the facility.

“It’s been a tough day for all the team at the site. Making decisions like this is never easy,” Palairet said.

“Our strategy is about creating end-to-end value and growing total returns for our farmer shareholders. We believe the best way to achieve this is to focus on our strengths and scale in ingredients and foodservice, and we are prioritising our investment on the parts of our operations that are better suited to this.”

Fonterra said it would work through a consultation process, including exploring potential redeployment opportunities for staff before operations are planned to come to an end on July 31.

“We are committed to supporting our employees as we work through the next steps,” Palairet said.

Canpac is Fonterra’s largest secondary packager of milk powders and nutritional products, according to its website.

The site has state-of-the-art product-blending facilities, can assembly machines, can-filling lines and sachet packing machines.

However, Fonterra said Canpac currently packed up to 4000 metric tons of powders a year, less than 1% of the co-op’s total product volume.

Last year, Fonterra said it would progress with the divestment of its consumer business.

Its consumer products business includes household-name brands such as Anchor, Mainland, Anlene, Anmum and Chesdale, representing about $3.4 billion of invested capital.

In its last sale update, issued earlier this month, Fonterra said it was actively undertaking a dual-track process, pursuing both a trade sale and initial public offering (IPO) as potential divestment options.

The consumer arm has been named Mainland Group and market expectations are for proceeds from the sale to be around $2.5 billion to $3b.

Australian media have reported private equity firms and strategic suitors lodged bids for Mainland.

The Australian’s DataRoom said bidders included France’s dairy giant Lactalis, advised by Rothschild, and Bega, advised by Kidder Williams.

It said Swiss investment bank UBS could also be jointly advising Bega, which has a market cap of A$1.6b ($1.720b).

Yesterday an Australian court dismissed proceedings taken by Fonterra to seek a determination of its rights regarding its licensing agreement with ASX-listed Bega Cheese.

Bega is an Australian diversified food and drinks company with whom Fonterra has long had a commercial relationship.

In its decision the New South Wales Supreme Court said it did not have jurisdiction to make the declarations sought.

Fonterra said after the ruling that its plans to divest Mainland were unchanged.