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Lactose Business Poised for Significant Growth

23 March 2006

Campina and Fonterra’s Pharmaceutical Lactose Business Poised for Significant Growth Through Joint Venture

A proposed joint venture between Fonterra and Campina will position the parent companies to build a leading position worldwide in excipients for the pharmaceutical industry.

(Excipients are inactive substances used as carriers or diluting agents in active drug formulations, or to aid the process by which a pharmaceutical product is manufactured).

Campina is one of Europe’s leading dairy companies, and is headquartered in the Netherlands. Fonterra is the world’s largest exporter of dairy products, and is based in New Zealand.

Fonterra Chief Executive Andrew Ferrier said the Joint Venture would enable both companies to better serve their pharmaceutical customers, and provide more market opportunities for Fonterra’s lactose business.

“When we opened our new Inhalation Grade Lactose site at Kapuni in May 2005, I said that we would continue to look for opportunities to grow our specialty ingredients business, including through international partnerships and alliances.

“Campina has a strong position in Europe and Japan, while Fonterra has been very successful in building a strong position in the Asia Pacific region, and has a major supply agreement with one of the world’s leading pharmaceutical companies. This Joint Venture will lift our pharmaceutical lactose specialty products business to a whole new level.

“The Inhalation Grade Lactose Plant at Kapuni will be owned and operated by the Joint Venture. In addition, the JV will have other production locations in the Netherlands and Germany that are currently part of the Campina group, said Mr Ferrier.

“With this Joint Venture Campina and Fonterra will improve their position in the global excipient market and strengthen their presence in the fast growing emerging pharmaceutical markets in the Asia Pacific region”, said J.J.G.M. (Justin) Sanders, CEO of Campina BV.

“The Joint Venture is fully in line with Campina’s growth strategy and will form a solid basis to continue long term investments in innovation, quality and service, needed to stay ahead of ever increasing market demands.

“It is an opportunity to further complement our position in the pharmaceutical business in which our business unit DMV International has achieved a strong market presence. The complementary strengths of both parties and the ability to dual source will enable the Joint Venture to enhance growth and become a leading supplier of pharmaceutical ingredients.”

The Joint Venture agreement is now subject to regulatory clearance and internal consultation.

Further background on the JV partners and the agreement

The proposed Joint Venture involves the business unit Pharma of DMV International, which is part of the Group Industrial Products of Campina, and Lactose New Zealand, which is a wholly owned subsidiary of Fonterra.

The business unit Pharma develops, produces and markets excipients to the pharmaceutical industry world-wide. It focuses on quality and has implemented cGMP for Active Pharmaceutical Ingredients in all production facilities. It is also dedicated to delivering high service levels through a dedicated global sales and distribution network.

Fonterra’s business unit Lactose New Zealand (LNZ) is the seller and marketer of Fonterra’s pharmaceutical lactose, which is manufactured by Fonterra Ltd. LNZ has a similar profile to the business unit Pharma of DMV International, in that it sells and markets to the pharmaceutical industry worldwide.

The JV will focus on expanding the business with a broad portfolio of excipients for the pharmaceutical industry.

All current products in the parents’ portfolio, used as excipients in pharmaceutical application (ethical, generic, OTC) plus the lactose used in the production for Fine Chemical or
semi-Pharma applications (Lactulose, Lactitol) will fall within the scope of the JV. Lactose for food application will stay with the parent companies Campina and Fonterra.

The JV will have its own production locations in the Netherlands (plant for disintegrants in Foxhol), Germany (plant for direct compression in Nörten-Hardenberg), and New Zealand (plant for inhalation lactose in Kapuni), with regional sales offices around the world. It will be owned 50:50 by Fonterra and Campina.

Campina is an international co-operative company active in the development, production, sale and distribution of dairy and dairy-related consumer products and advanced ingredients for the food and pharmaceutical industries. Campina has some 7,000 employees and an annual turnover of around € 3.5 billion (2004). The company holds leading positions in the markets in which it operates, with consumer brands such as Campina, Landliebe and Mona. Campina’s Industrial Products group operates on a global scale. This ingredients group, with the DMV International division, is a successful partner for the food and pharmaceutical industries, among others.

Fonterra is an international dairy co-operative with an annual turnover of around € 5.9 billion and approximately 18,000 employees. Fonterra is the world's largest exporter of dairy products, exporting 95 percent of its production. Fonterra Co-operative Group Ltd operates in over 140 countries worldwide.



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