Thursday, April 25, 2024

Work set to resume on HVN site

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Earthworks on Happy Valley Nutrition’s plant site in Otorohanga will recommence later this year after the work was delayed because of covid and due to the company being unable to secure funding in prefered timeframes.
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Earthworks on Happy Valley Nutrition’s plant site in Otorohanga will recommence later this year after the work was delayed because of covid and due to the company being unable to secure funding in prefered timeframes.

It was now focusing on securing funding for the plant’s construction, HVN chief executive Greg Wood said in an online investor update.

Earlier, in an August 31 update, it said the company was now unlikely to secure the necessary equity financing by the second half of 2021 given the covid environment and travel restrictions.

“Discussions on the debt funding are well advanced. As a result, the company has decided to delay the next phase of the project until sufficient capital has been raised, this also impacts the first-product delivery date of August 2023,” Wood said.

He says they have had “positive interest” from debt providers and were in discussions with equity parties.

“The key area of focus for us right now is securing funding for the commencement of construction; we have a budget of $300 million and we’re looking at a combination of debt and equity,” he said.

“We are now working through the details of the construction contract ready for award with our preferred vendor, GEA, subject to funding.”

Wood says they had also spoken to farmers about supply and planned to begin milk procurement once that funding is secured. He was confident the business could lure suppliers for the factory.

“We have spoken to a range of farmers about our value proposition and have a robust milk supply strategy in this regard,” he said.

The factory will require around 150 million litres of milk annually to operate. There are 1400 dairy herds producing 5.2 billion litres of milk annually within a 100km radius of its location.

Wood says it had also signed up three customers to purchase its products and securing further customers to bring the plant’s capacity up to 50-60% for its first three years of production was a second area of focus.

Around 36% of the plant’s capacity has been filled. Its spray dryer should be able to produce 35,000 tonnes of product a year and an AMF plant, capable of producing 6000 tonnes of product.

“We have 34% of the spray dryer capacity and 50% of the AMF plant contracted, subject to conditions related to building the plant,” Wood said.

HVN first year revenue projections were at $100 million, ramping up to $325m over time.

Economic modelling showed the business would break even after the first year with Ebitda accounting for 15% of its revenue.

After five years, HVN planned to install a $40m packing plant, which he says would allow the business to reach a higher margin of $225-$325m.

HVN was also planning on installing a second dryer in the future, which had not been included in this modelling.

Wood says the business had shifted its focus from producing infant formula because of the current challenges in those markets.

“We still plan to target this and other age group segments and other age group segments in the future,” he said.

Instead, the company will look to produce high-end nutritional products such as yoghurts, sports drinks and various on-the-go snack bars made from whole and skim milk powders.

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