SECURING a stable milk price for suppliers, improved access to new high value milk and nutritional powder markets in China and securing additional capital for technical upgrades are the benefits Burra Foods managing director and chief executive Grant Crothers sees in an agreement reached with one of China’s leading dairy companies.
Subject to approval from the Foreign Investment Review Board a change in shareholding in Burra Foods will result in 79 per cent ownership of the company by the Inner Mongolia Fuyuan Farming Co Ltd (Fuyuan).
Mr Crothers told the Gippsland Times the share deal would improve Burra Foods’ international market access and raise capital to fund the expansion and modernisation of its dairy processing facility in Korumburra.
“There are only winners in this deal, it underpins our business, it will underpin employment at the plant and underpin our milk price,” he said.
With the new capital to be focussed on technical and equipment upgrades in the Korumburra plant, Mr Crothers does not see an urgent need to secure more suppliers, but emphasised the move would underpin a stable return to Burra Foods’ 170 supplier farmers.
“We will need more volume in the fullness of time, but we still have the headspace to grow in the short term. This is not a volume play but a value play,” he said.
Mr Crothers does not foresee any major difficulty in gaining FIRB approval for the deal despite the board’s recent rejection of the sale of the Kidman pastoral empire.
“Until it’s done it’s not done, but it’s not the Kidman sale, it’s a very different asset and I expect this case will be easy,” he said.
Fuyuan is owned by a number of investors with the largest shareholder being China Mengniu Dairy Co Ltd (Mengniu), a company listed on the Hong Kong Stock Exchange, which manufactures and distributes dairy products throughout China.
Existing shareholders including Burra Foods’ founder, Grant Crothers and Japanese dairy distributor, ITOCHU Corporation will maintain a combined 21 per cent interest in the company with Mr Crothers continuing in his role as managing director and chief executive.
The agreement has been welcomed by the producer group Australian Dairy Farmers and the United Dairy Farmers, as securing a significant advantage for Burra Foods in the volatile Chinese milk market while maintaining its cheese market in Japan.