Farmers urged to back float vision

By VICTORIA TAIT in Sydney

Australia's Dairy Farmers kicked off meetings with farmers yesterday aimed at changing from a co-operative structure to a corporation in time to take part in an overhaul of the country's dairy industry.

The change also paves the way for Dairy Farmers to float on the stock market, joining larger rival National Foods.

Dairy Farmers spokesman Stuart Silver said the co-operative, owned by 3700 farmers, will submit documents to the NSW Supreme Court next month, and hopes to put the plan to members by June 30.

Dairy Farmers is one of Australia's three big players in the nation's A$11 billion ($12.3 billion) dairy industry.

It is the country's second-biggest fresh milk producer behind market leader National Foods and ahead of Parmalat Australia, the domestic arm of ailing Italian food group Parmalat Finanziaria.

Although Parmalat Australia has repeatedly said it is not in sale talks with anyone, it is seen at the centre of a keenly awaited revamp of Australia's dairy industry, shifting the focal point from a merger between National Foods and Dairy Farmers.

Analysts say Dairy Farmers could more swiftly pounce on any attractive assets that could shake out of a Parmalat sale if it were structured as a company rather than a co-operative.

"If they did list or were able to attract equity capital apart from their farmer base, that would allow them to accelerate any growth aspirations they may have," said David Cooke, food analyst at ABN Amro.

Earlier this week, French food giant Groupe Danone sold its 10 per cent stake in National Foods, sparking fresh buzz over the potential shape of Australia's dairy industry revamp.

The industry has been expected to shrink to two players since milk prices were deregulated in the northern state of Queensland about four years ago.

Danone's exit has left two big players on National Foods' share register. Dairy Farmers has about 9 per cent and New Zealand processing giant Fonterra 18 per cent.

National Foods has openly declared its interest in Parmalat's assets here, and analysts say National Foods' size and balance sheet mean it would be a buyer, not a target.

They say National Foods would be especially interested in Parmalat Australia's core assets in Queensland, where the group is based.

Meanwhile, a corporate Dairy Farmers would be able to move quickly to secure Parmalat's business in Victoria, where Dairy Farmers does not operate.

Fonterra is more interested in expanding its export business than buying full-scale operations in Australia, analysts say.

Dairy Farmers posted a first-half net profit of A$14.6 million from A$2.8 million a year earlier.