Fonterra plans to spend $75m at its Studholme plant in the South Island.
Fonterra plans to spend $75m at its Studholme plant in the South Island.
Fonterra says it will spend $75 million on expanding its Studholme dairy factory in South Canterbury to create a hub for making high-value proteins.
High-value proteins - developed with Fonterra intellectual property - are used in medical and high-protein sports nutrition.
Chief executive Miles Hurrell says the investmentof around $75m is part of the co-op’s strategy to grow value through its ingredients business by partnering with customers.
In May, Fonterra said it was looking at full or partial divestment options for some or all of its global consumer business, including well-known brands such as Anchor, and its integrated businesses Fonterra Oceania and Fonterra Sri Lanka after conducting a strategic review.
Fonterra has appointed Jarden, alongside JP Morgan and Craigs Investment Partners, to jointly work as transactional advisers on the divestment process, which is expected to be finalised towards the end of this year.
Hurrell said declining birth rates in China and around the world had caused a drop-off in infant formula demand.
“But at the same time, we have seen big growth in the ageing population and in demand for proteins and medical nutrition,” he said.
“If you go back a decade, it was only the bodybuilders who had the whey protein products and the like, but this is becoming very much mainstream now, with protein drinks and protein bars being consumed before, during and after workouts - that’s the category that is growing.”
Hurrell said Fonterra had valuable expertise in dairy science and innovation.
Fonterra chief executive Miles Hurrell.
“The expansion of our Studholme site will allow us to increase production of this high-value product and ultimately grow returns to farmers,” Hurrell said.
Fonterra president of global markets ingredients Richard Allen said the co-op’s dairy ingredients were highly sought after.
“We see significant opportunities in the global high-protein dairy category, which is projected to grow by close to US$10 billion [$16b] over the next four years, at an annualised growth rate of 7% per annum,” he said.
“Increasing our manufacturing capacity for functional proteins will enable us to continue to strengthen our offerings with existing customers as well as attract new business.”
Site works at Studholme will begin next month, with the first product due to come off the line in 2026.
The site will continue to support the South Island’s milk processing as it has done since it was acquired by Fonterra in 2012.
Allen says the project team reviewed Fonterra’s worldwide asset network before deciding on Studholme.
The project will also support the conversion of Studholme’s existing coal boiler to a coal-free alternative in line with Fonterra’s commitment to exit coal by 2037.
$8.50, coupled with falling interest rates after the Reserve Bank cut the interest rate earlier this month, meant most farmers would be trading above break-even, Hurrell said.
The co-op also increased its advance rate schedule for the 2024/25 season by about 10%, allowing farmers to be paid earlier in the season.
Fonterra also said its earnings from continuing operations were expected to be at the top end of the forecast range of 60-70 cents per share.
