January 11, 2013

China's Yashili to invest US$210 million milk plant in New Zealand

China's Yashili International Holdings plans to invest CNY1.1 billion (US$210 million) to build a milk processing plant in New Zealand.

The Chaozhou City, Guangdong-based company's board signed off on a project to set up a manufacturing facility in New Zealand to process up to 52,000 tonnes of finished and semi-finished products including base milk powder by the second half of next year, according to a statement on the Hong Kong Stock Exchange. Yashili currently sources most of its raw milk from New Zealand.

The company will spend CNY950 million (US$153 million) on acquiring land and building the plant, and a further CNY150 million (US$24 million) as working capital for a New Zealand subsidiary.

The local unit, Yashili New Zealand Dairy Co, was incorporated in July last year according to Companies Office records and has entered into a conditional agreement to buy land where the facility will operate. The acquisition is subject to certain conditions, including approval from the Overseas Investment Office.

The investment comes a month after China's Inner Mongolia Yili Industrial Group flagged plans to spend some US$214 million buying and upgrading Oceania Dairy Group's South Canterbury milk powder plant.

Chinese investment in New Zealand has been a heated topic in recent years after bids to buy large tracts of farm-land forced the government to announce a U-turn on its plans to free up overseas investment and a High Court ruling made the OIO impose a more rigorous analysis of foreign purchases.

Yashili was set up by brothers Zhang Lidian and Zhang Likun in 1998 and is ultimately controlled by the Zhang family. US private equity firm Carlyle Group bought a stake in the Chinese company in 2009 to ramp up its research and production, and raised HKD2.7 billion (US$348 million) when it floated a minority share in Hong Kong the following year.

The shares gained 0.4% to HKD2.38 (US$0.31) in trading Thursday (Jan 10), and have almost doubled in the past 12 months.