Breakaway dairy firm plans $100m expansion

Dairy processor Synlait, set up in Canterbury by farmers who broke away from Fonterra, plans to raise $100 million to fund the expansion of its Dunsandel plant.

Managing director John Penno has confirmed that the board had decided on the measure.

At the official opening of its factory last month, the company revealed that it was already close to its maximum processing capacity.
The new capital was needed for a second dryer, to manufacture a new range of products to high specifications.

The company had milk contracts that would grow production to 300 million litres in the next year, and the second drier would almost double the size of the factory and boost processing capacity to 550 million litres a year by 2011.

"We now have the security of our supply base, the track record of the first plant and customer demand for these new products to push ahead with these plans," Mr Penno said.

The site was designed with the flexibility to add a second dryer at marginal cost, but the company had initially expected the demand for higher specification products would be some years away.

It has previously said it wants to create specific dairy products by manipulating the feed of cows.

Some herds may be fed grains to boost the benefits of their milk for consumers' immune systems, brain health and wound healing. Others may be fed a diet that blocked a significant amount of cholesterol-elevating fat from their milk.

Mr Penno has claimed links to multinational manufacturers of functional foods, and 23 per cent of Synlait shares were held by a Japanese shareholder, Mitsui.

He said the new capital raising would enable the company to continue to grow and reduce debt "while we manage the risks of growth in the current environment".

The North Canterbury region's dairy sector has grown by about 7 per cent per year over the past decade, and of the 80,000 cows which supply the company, 15,000 are company-owned.

Synlait recently won a legal battle with farmer-owned irrigation company Central Plains Water (CPW) over who should have priority to take water from the Rakaia River.

Synlait plans to draw 12 cumecs from the Rakaia to spray-irrigate 10,000ha of dairy farms in the Dunsandel-Te Pirita area.

- NZPA