Scales Corporation is to invest more than $30 million in two Australian pet food processing ventures, expanding its currently very profitable Global Protein division.
Scales is subscribing for 33% interest in a new processing plant in Melbourne with two industry-established partners who have extensive supply relationships.
At the same time it will purchase 50% of the Australian operations of Fayman International, including a 42.5% interest in ANZ Exports.
The combined cost is estimated at A$27m (about $30.7m), to be funded out of Scales’ existing cash reserves.
Scales has been cashed up since the divestment of the Polarcold cool storage business in 2019.
Scales’ half-year results in August contained a very good contribution from the newly named Global Proteins division, which lifted underlying earnings to $30.4m, up 88% on the previous corresponding period.
It sits midway in the supply chain of meatworks by-products to pet food manufacturers.
Scales operates in New Zealand, Australia and in the United States, where very good operating margins were gained this year.
The NZ partner is Alliance Group in a partnership called Meateor, and the use of that name will now be extended to Australia.
Scales managing director Andy Borland said in August mainly offshore opportunities existed to grow the Global Proteins division, currently providing just under half of group revenue.
The Fayman International partnership announcement has been made just one month on.
“Australia’s product mix, growth and proximity to Asia make it a strategically important supply base for both our pet food customers and edible by-products markets.
“The partnership that we have entered into significantly strengthens our diversity of proteins and our supplier base. The investment also unlocks potential synergies in our sea-freight logistics activities.”
Scales said it is investing in state-of-the-art equipment to develop a high-quality processing facility.
The facility is expected to be operational in Q1 2023 and will scale up to full production later in the same year.
“Our partners include the Fayman family, who bring extensive supply relationships to the operation,” Borland said.
“Fayman International has been successfully developed and grown over the past 40 years and has strong relationships with suppliers and customers.”
The new Australian businesses are not expected to contribute to FY23 earnings.