Fonterra unveils alternative Aussie buys

It might have missed out on National Foods but Fonterra yesterday unveiled alternative plans for expansion in Australia.

The New Zealand dairy giant plans to buy the 50 per cent that it doesn't already own of Australia's fourth-largest dairy company, Bonlac. It will also buy a Victorian milk-processing factory from Nestle.

Chief executive Andrew Ferrier said those moves - and one smaller buy announced yesterday - should boost Fonterra's Australian revenue by about $200 million to $1.6 billion.

Ferrier refused to disclose the cost of the purchases, saying they were private sales.

In April, Fonterra walked away from the bidding war for listed Australian dairy company National Foods with close to a $250 million profit after it sold its 19.9 per cent stake to San Miguel.

It had been prepared to pay almost $2 billion for National Foods.

Fonterra hopes to buy the outstanding Bonlac stake from the Australian farmer-owned Bonlac Supply.

The sale has the approval of the Bonlac board but it must go to a farmer vote next month.

Fonterra will pay for the stake with capital notes.

Fonterra says it plans to convert the Nestle factory, at Dennington on Victoria's southwest coast, to process only milk powder in order to make it more cost efficient. Bonlac is primarily an exporter of milk powder. It has revenue of more than $1 billion but has struggled to return significant profits in the past few years.

Ferrier said owning 100 per cent of Bonlac would improve cost efficiency but that would not make a significant impact on farmer payouts in the immediate future.

The first steps in Fonterra's "plan B" strategy for the Australian consumer market were also unveiled.

All its Australian consumer products companies - Bonland Dairies in Melbourne and Peters & Brownes in Perth - are being consolidated under Fonterra Brands.

It has also bought Murrumbidgee Dairy Products - a liquid milk, desserts and yoghurt company based in Wagga Wagga. That company - which owns the Riverina Fresh brand - has annual revenue of about $40 million.