Westland Milk to build infant formula plant

Westland Milk is going 60/40 with Ausnutria in the Pure Nutrition infant formula plant. Photo / Ross Setford

Westland Milk is putting a $3 million plot of land next to its Rolleston factory into a new joint venture with Hong Kong-listed Ausnutria Dairy to build a new infant formula plant operating under the Pure Nutrition moniker.

The milk processor will take a 40 percent stake in the Pure Nutrition joint venture company, while Ausnutria will get 60 percent with the Hong Kong company injecting $4.5 million of cash and loaning $32 million to the subsidiary to build a blending and canning plant at Rolleston, Westland said in a statement.

Construction is expected to kick off soon with completion slated for late next year, adding 30 jobs to the Canterbury town. The plant's initial capacity is expected to be about 20 million cans of milk formula, or 15,000 tonnes, depending on the product mix.

"Pure Nutrition will, effectively, be a substantial new customer for Westland Milk Products," chief executive Toni Brendish said. "In addition to the direct sales to Ausnutria in China, which will continue, Westland will be the JV's sole New Zealand supplier of dairy-based powders."

This week the Hokitika-based milk processor affirmed its forecast cash payout range for the 2016/17 season of between $4.55 and $4.95 per kilogram of milksolids, while warning the global dairy market was still prone to volatility.

As part of the deal with Ausnutria, the Hong Kong firm will buy a minimum 3,000 tonnes of infant and toddler nutritional product from Westland in the first year of a five-year supply contract, rising to 5,000 tonnes in each of the following four years.

In a statement to the Hong Kong stock exchange, Ausnutria said all profits of the joint venture will be reinvested until Dec. 31, 2022, without any distributions to the shareholders unless they unanimously agree otherwise.

"The directors believe that the joint venture will be an important step for the group to
further develop and diversify its milk source and hence enhance its capabilities in the production of infant formula to cater for the anticipated continuous growth of infant formula of the group in the PRC (People's Republic of China) as well as overseas countries," Ausnutria said. "The board believes that the group can also leverage on Westland's expertise and resources through the establishment of the joint venture in New Zealand."

Ausnutria processes and sells dairy products under its own brands, primarily in China, but also in Europe, North America, the Middle East and Russia. It also owns a milk processor plant in the Netherlands.

-BUSINESSDESK