Fonterra will invest more than NZ$100m ($82.4m, €62.8m) in a new ultra-high temperature (UHT) milk and cream processing plant in New Zealand in an attempt to meet growing Asian demand for heat-treated dairy products.
The company has announced plans to build five new UHT lines the new facility, which will be built at Fonterra’s existing Waitoa, New Zealand dairy processing site. Once fully operational the lines will produce 95m litres of UHT milk and cream per year.
Fonterra’s UHT production capacity should double in coming years as a result of the investment, said Fonterra CEO Theo Spierings.
In a statement sent to DairyReporter.com, Fonterra confirmed that the investment will enable it to meet increasing international demand for UHT dairy products.
“The global demand for UHT is growing by around 3.3% per year and with around 20% of the world’s population living without access to electricity UHT is a safe, and longer-lasting food option which doesn’t require refrigeration,” said Fonterra NZ Milk Products managing director, Gary Romano.
“This is because people are looking for a safe and longer-lasting dairy nutrition option which doesn’t require refrigeration, which is particularly the case in developing nations in Asia.”
Winter milk contract opportunities
Fonterra CEO Spierings added that the UHT production increase will also allow the company to concentrate on meeting domestic demand for longer-life dairy.
“Products from the new plant will be bound for Asia markets and that will allow us to concentrate all our domestic UHT production – including Fonterra Milk for Schools – at Takanini in Auckland.”
Around 50 jobs will be created at the new plant, said Spierings. He added that the investment would also provide new opportunities for Fonterra farmers in New Zealand’s North Island.
“Milk supply in New Zealand is seasonal because it follows the grass growth curve. However, UHT production requires year round milk supply so we will be talking to our farmers about the opportunity for more of them to take up winter milk contracts. This will enable them to take advantage of the milk price premium that these contracts include,” said Spierings.
“A recent survey of our farmers indicated that a good proportion of them in the Upper North Island would be keen to take up winter milk contracts,” he added.
Share and unit holder bonus issue
Alongside today’s UHT investment announcement, Fonterra unveiled a new five-point plan designed to develop milk production and support the dairy co-operative’s growth.
The plan includes a bonus issue. The bonus issue, which is scheduled for 24 April 2013, will provide all share and unit holders with one free additional share or unit for every 40 already held on 12 April 2013.
It also includes a further supply offer for farmer shareholders, a dividend re-investment plan, more-flexible contracts, and new winter milk contract opportunities as a result of the UHT plant investment.
“For Fonterra to grow, we need our farmers to grow. With a stable capital base, we now have certainty and can offer farmers more ways to grow milk supply and give them more time to share up,” said Fonterra chairman, John Wilson.