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China Animal Husbandry to take 72% stake in Mataura Valley Milk, fund $200M plant

Thursday 28th July 2016

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State-owned China Animal Husbandry will take a 72 percent stake in Mataura Valley Milk in exchange for funding construction of a $200 million milk powder manufacturing plant in Gore.

Work on the plant will start in October and follows eight years of work to get the project at McNab, north of Gore, off the ground. It will create at least 100 new jobs, the company said. 

China Animal Husbandry Group will be the major investor while some 20 percent of the company will be held by Southland dairy farmers, 5.6 percent by Hamilton-based dairy business BODCO, and the remainder mostly by New Zealand investors.

Mataura Valley first mooted the plant in 2008, but plans stalled in 2012 as the company couldn't find the right investor following the global financial crisis. Progress was made in 2014 with the Gore District Council refreshing its memorandum of understanding with Mataura about the project, but were delayed last year when milk prices collapsed.

"Anything this size and scale does take a significant investment of time and money to find a partner," Mataura director Aaron Moody told BusinessDesk. "There have been a number of discussions over the years - I think they were very close in 2008, but I understand at the time the GFC had an impact on the partner they were working with then."

Moody said Mataura Valley had been very keen to find local investment money but unfortunately there hadn't appeared to be the appetite within New Zealand for a project this big. 

"We have a great partner now - China Animal Husbandry Group - who are state owned, and while they bring capital they also bring invaluable distribution channels and knowledge of the Chinese market," Moody said. 

The plant will produce infant formula, UHT cream and some skim milk powder, but is really focussed on the international infant formula market which it said was worth $57 billion in 2013 and is expected to be worth $38 billion in China alone by 2017.

"The appetite for nutritional powders is huge with China’s imports of infant formula growing by 51 percent in the 12months to February 2016," Moody said in Mataura's release. "Importantly, the price for infant formula and growing up milk powders is less reliant on the global commodity dairy price."

BODCO, a minority shareholder, will can and distribute many of the products, and Moody said that company's existing brands in China would be helpful, though it's also looking to build a brand outside of China.

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