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Synlait Milk plans factory upgrade to meet demand in China's US$15 billion formula market

Wednesday 8th May 2013

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Synlait Milk, which operates the largest purpose built infant formula plant in the southern hemisphere, will spend $15 million to enable its factory to produce more soluble powder for China's expanding US$15 billion market.

The move will enable Canterbury-based Synlait to better compete with Dutch-based FrieslandCampina which operates the world's only other factory able to produce lactoferrin as a spray dried powder to pharmaceutical standards. The market for lactoferrin has grown from 45,000 kilograms in 2001 to 185,000 kilograms in 2012 and is expected to grow to 262,000 kilograms by 2017.

"There is a global shortage of lactoferrin driven largely by the demand for infant formula," Synlait Chief Executive John Penno said in a statement. In China, infant formula sales are "growing by 15 percent with the addition of 18-20 million new babies annually".

Synlait, which posted its first annual profit of $6.3 million in 2012, is 51 percent owned by the Chinese firm Bright Dairy, with the remainder held by the company's founders. It failed to attract investors in a proposed $150 million initial public offering in 2009.

The company is investing in the plant after demand from customers including YinQiao Xi'An, the largest dairy manufacturer in north western China, Penno said.

Lactoferrin, which sells for US$500-to-US$1,000 a kilogram, is a bioactive protein extracted from milk and used in infant formula and adult nutritional powders. It is typically freeze dried and milled which results in particles that are difficult to dissolve when the formula is mixed.

Synlait expects to produce 18 metric tonnes of the powder within four years, starting later this year or early 2014. It currently produces 90,000 metric tonnes of value-added and nutritional powdered dairy products.

The company also expects to start building a packaging plant and warehouse before the start of the dairy season in August, it said.

BusinessDesk.co.nz

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