September 26, 2013
Fonterra announced its second farming hub in China, with five 3000-cow farms located at Ying County, Shanxi Province, which is expected to be in production in the second half of 2014.
When fully operational, Fonterra's two hubs will together produce up to 300 million litres of milk per year. This is the next step in the company's strategy to produce one billion litres of milk in China by 2020.
Fonterra President of Fonterra Greater China and India, Kelvin Wickham, said, "This is a key part of our strategy to become a more integrated dairy business in China and to contribute to the growth and development of the local Chinese dairy industry. Having secured the right location in the Shanxi province, we are now able to approach potential strategic partners."
"Ying County provides an ideal environment for us to expand our farming operations due to its new agricultural zone, proximity to customers and the high quality supply of animal feed available in surrounding areas."
Fonterra will employ more than 500 people in Ying County, of which around three quarters will be local employees.
"The second hub builds on our existing investment in Hebei Province and will help us to meet customer and consumer demand for high quality fresh milk in China. Raw milk supply growth in China has been around 2% over the past three years but demand is growing at around 6% - 8%. So there are significant opportunities for Fonterra to help bridge this supply gap by growing our own domestic milk supply in China and continuing to import our high quality finished dairy products."
"The new Ying County farm hub is a significant step forward in our strategic plans in China. We have received strong support from many levels of government in China and we are looking forward to continuing to build strong partnerships with our local communities in both Shanxi Province and Hebei Province over the coming years," Mr Wickham said.
Fonterra has extended its farmer training programme to Shanxi to support the new hub development and to build the strength and capability of the local industry.
Fonterra is accelerating its expansion strategy in China and plans to sell its own branded infant milk formula in 70 cities there within three years, its chief executive officer, Theo Spierings said on Wednesday in an interview with Reuters
Despite the drought and contamination scare of its whey protein concentrate earlier this year hardly dented Fonterra's financial performance for the year, with total sales volumes flat at 4 million tonnes. Net profit after tax increased 18% to $736 million, earnings per share increased 7% to 44 cents, although its revenue of US$18.6 billion is down by 6% and its normalised earnings before interest and tax (EBIT) of US$1 billion is a decrease of 3%.
Normalised EBIT for Greater China was up 20% on-year with a strong result from China foodservice, Hong Kong and its businesses in Taiwan. This was partially offset by a lower contribution from China Brands, as a result of increased investment to grow market share and roll out Anlene into new cities. On a constant currency basis, normalised EBIT for Greater China was up 21% on-year.
