Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Fonterra And San Lu Reach Joint Venture Agreement


Fonterra And San Lu Reach Joint Venture Agreement – Significant Investment by Foreign Dairy Company in China

[BEIJING, 1 December 2005] Shijiazhuang San Lu Group and Fonterra Co-operative Group announced today that they had reached agreement on a new joint venture partnership that would see Fonterra acquire a 43% stake in the company for RMB864 million (US$107 million).

The two companies initialled documents at a special ceremony at the prestigious Diao Yu Tai State Guest House in Beijing today.

The agreement, which is subject to approval from Chinese regulatory authorities, represents one of the largest-ever investments by a foreign dairy company in China.

The overall San Lu Group’s business ranges from dairy farming to processing as well as new product development through its own research and development. San Lu’s overall sales in 2005 are expected to be RMB7.5 billion (US$925 million).

Shijiazhuang San Lu Group is a leading dairy company in China, producing a wide range of product lines in the three main dairy categories – powdered milk, liquid milk and fresh dairy. Shijiazhuang San Lu Group’s main products are nutritional milk powders. It has maintained the number one position in both production and sales of blended powders nationally for 12 consecutive years.

Shijiazhuang San Lu Group is renowned for the quality of its products. Its milk powders and nutritional milks have been granted the status of national products and “Renowned Chinese Brand Products”.

New Zealand-headquartered Fonterra is the largest marketer of dairy ingredients in the world, exporting dairy ingredients to 120 countries. Fonterra has total revenues of NZ$12.3 billion (US$8.5 billion) and is world-renowned for the production, processing and sales of dairy products. Fonterra exports more than 90% of its total production.

San Lu Chairwoman Tian Wenhua said: “Next year is San Lu’s 50th birthday. After the continuous endeavour of several generations, Shijiazhuang San Lu Group’s brand has become a famous Chinese brand. We have accumulated extensive experience in new product R&D, operational management and sales and marketing, and maintained a robust and sustainable growth momentum for many years.

“Fonterra is an acknowledged leader in dairy production with extensive management experience, world-class R&D teams and advanced marketing skills.

“I believe the co-operation between Shijiazhuang San Lu Group and Fonterra is significant to the development of the Chinese and global dairy industry. It signals that Shijiazhuang San Lu Group has taken the first crucial step towards its objective to aim at world-class levels and develop Shijiazhuang San Lu Group into a global leader in the dairy industry in line with the requirements of the international market, with expanded market share and increased strength.”

Fonterra Chief Executive Officer Andrew Ferrier said the investment reflected Fonterra’s confidence in the future of the dairy industry in China.

“Over the past 20 years, Fonterra has been the number one exporter of dairy ingredients to China. We have been impressed by the spectacular growth in consumer demand for dairy products in China as well as the way Shijiazhuang San Lu Group has grown strongly to meet this demand,” said Mr Ferrier.

Fonterra Brands Managing Director Sanjay Khosla said the investment was the logical next step for Fonterra in China.

“We will complement our existing importing and consumer businesses in China by partnering with a successful local company that has access to local fresh milk supplies,” said Mr Khosla.

”The joint venture would draw on the respective strengths of Fonterra and Shijiazhuang San Lu Group. It is a professionally managed company that has a good track record for growth. It has an established sales and distribution network reaching more than 600 cities in China and also has some of the most modern milk processing facilities in China,” Mr Khosla said.

Under the agreement, three Fonterra representatives will join the seven-member joint venture board. A senior Fonterra representative will also join Shijiazhuang San Lu Group’s senior executive team.

The business scope of the joint venture will continue to be the manufacture, marketing and distribution of consumer dairy products within mainland China.

The main goal of both parties is for the joint venture to become the leading dairy producer in China with high levels of competitiveness and profitability.

The joint venture will pursue a public listing of its shares at an appropriate time in the future.

Fonterra was advised on this transaction by Deutsche Bank, PricewaterhouseCoopers and Baker & McKenzie.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Trade: NZ Trade Deficit Widens To A Record In September

Oct. 27 (BusinessDesk) - New Zealand's monthly trade deficit widened to a record in September as meat exports dropped to their lowest level in more than three years. More>>


Animal Welfare: Cruel Practices Condemned By DairyNZ Chief

DairyNZ chief executive Tim Mackle says cruel and illegal practices are not in any way condoned or accepted by the industry as part of dairy farming.

Tim says the video released today by Farmwatch shows some footage of transport companies and their workers, as well as some unacceptable behaviour by farmers of dragging calves. More>>


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


International Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news