June 22, 2011


Fonterra supplies milk for Natural Dairy



Hundreds of millions of packets of milk to be imported by Natural Dairy to China will be provided by Fonterra.


Fonterra has confirmed it is providing Natural Dairy's Tauranga-based supplier UBNZ Funds Management with regulated priced milk. The government is currently reviewing what dairy companies should be eligible to be supplied Fonterra regulated milk following increasing resistance from Fonterra.


UBNZ was formerly fronted by bankrupt businesswoman May Wang and became the major single shareholder in Natural Dairy in September. A convoluted deal whereby Wang's UBNZ companies and Natural Dairy would have bought the Crafar farms estate from the receivers was blocked in December by the government on the recommendation of the Overseas Investment Office, which said the application failed the good character test.


Fonterra, which controls 90% of the country's raw milk supply, is obliged by industry legislation aimed at checking its market power to sell up to 50 million litres of milk each a year to other processors at a regulated price.


UBNZ and Natural Dairy had planned to supply the Tauranga factory with milk from the Crafar farms.


Natural Dairy this week told the Hong Kong Stock Exchange it has received 11.6 million 250ml packs of long life milk from UBNZ since the Tauranga plant got New Zealand Food Safety Authority approval to export.


It said that through its mainland China-based subsidiary Jiang Xi Guo Yuan (Natural Dairy) Limited, it had paid UBNZ around NZD28 million (US$ 22.8 million) up front for 40 million milk packs whereby 11 million had been delivered to Guo Yuan, six million would be delivered this month, and the remainder on time as contracted.

Before Natural Dairy's Crafar farms deal fell through, it had contracted Wang to provide 150 million packs for NZD105 million (US$ 85.4 million). That contract has since been extended to 450 million packs a year at NZD0.70 (US$0.57) each. Wang is no longer a director of UBNZ.


Natural Dairy told the stock exchange the additional 300 million packs will be flavoured milk, produced in New Zealand.


It said it had also contracted UBNZ to supply infant formula milk powder, with an initial order of 20 million cans. NZSX-listed added value dairy processor and trader New Image Group told BusinessDay Natural Dairy had become a major customer. Founding chairman Graeme Clegg said New Image had started supplying infant formula to the Hong Kong company about six weeks ago.


Ad Feedback Some 100,000 cans have been delivered to China and another 250,000 cans would be delivered before the end of this month, Natural Dairy's notice to the HKSE said. All the infant formula had been sold at a profit.

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