Friday, July 1, 2022

Construction starts on Yili plant

Construction is under way on a $214 million infant formula milk processing plant in South Canterbury.

One of China’s largest dairy processors, Inner Mongolia Yili Industrial Group, was granted New Zealand Overseas Investment Office (OIO) approval on March 28, giving the go-ahead for the dairy plant at Glenavy, near Waitaki River.

The OIO approval also sealed the deal for Yili to buy Oceania Dairy’s land and resource consents, which were already in place, effectively enabling earthmoving equipment to start work immediately on the 38ha block of land.

After failing to raise about $75m to build its proposed milk powder plant on the Glenavy site, Oceania Dairy sold its milk supply contracts last year to Synlait Milk.

For Oceania Dairy the Yili transaction represented an exciting development, allowing Oceania’s business to be developed with the long-term support of a significant international dairy company. Yili has retained the Oceania Dairy identity.

New Zealand Dairies Ltd (NZDL) former chief executive officer Aidan Johnstone has been appointed Oceania Dairy chief executive officer. Johnstone has been joined in the Oceania executive team by Shane Lodge, the former NZDL quality and compliance manager and farmer liaison officer. 

Johnstone said there was good supplier interest, with preliminary co-operation agreements with some local farmers and interest from potential suppliers through conversions that were under way or planned for the region.

He said the Oceania contracts sold to Synlait were two-season contracts and with one more season to run it was an option those milk supply contracts could come back on the market for the 2014-15 season.

Oceania intends to use access to Fonterra’s regulated supply of raw milk.

The plant is scheduled to be completed by June 2014, operating at 60% capacity, with annual full capacity of 40,000 tonnes expected in the 2016-17 year.

The intention in stage one is to produce a base powder for export to Yili in China to produce infant formula.

The Chinese dairy company said it was attracted by NZ’s relatively cheap raw milk and the prospect of the free-trade agreement with China removing Chinese import tariffs by 2020.

The Inner Mongolia Yili Industrial Group produces and distributes dairy products and mixed feedstuffs, including milk powder for infants. It distributes its products primarily in domestic markets.

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