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Fonterra Health & Nutrition General Manager Speech

Speech By Fonterra Health & Nutrition General Manager Patrick Geals Opening Lactoferrin Plant At Hautapu 19 October, 2004

Ladies and gentlemen, welcome to this milestone development in Fonterra’s history. Completion of this plant is a significant advance in Fonterra’s value-add manufacturing capability.

It gives us not only the ability to extract lactoferrin, but the capability to extract other components from milk such as lactoperoxidase and growth factors – which I’ll touch on in a moment.

As global demand for functional foods grows, commercialisation of these bioactive ingredients is a key driver in our strategy to grow our value-add specialty business in key markets.

The design and construction of this facility brings together the many diverse skills within Fonterra, not only for the benefit of Fonterra, but also our global customers and our shareholders.

Before touching on key highlights of the project, I would like to talk to you briefly about lactoferrin. You’re probably asking why all the excitement? After all lactoferrin was first discovered in 1939 and isolated in 1960.

So what is lactoferrin? Briefly, it’s a whey protein found in the milk of most mammals.

It has many functions in the body. It’s the first line of defense against micro-organisms and we know it boosts the immune system.

But what’s really interesting is the research being done by The University of Auckland’s Osteoporosis Research Group with Fonterra support. This work is showing new and previously unrecognised functions in stimulating bone growth as well as inhibiting the cells that break down bone and absorb it.

With osteoporosis such a major health issue, I don’t need to explain how exciting these findings are.

With other research showing good signs that lactoferrin may be a useful addition in cancer therapy, it’s not hard to see why lactoferrin will be to the dairy industry what aspirin has been to the pharmaceutical industry.

Eighty per cent of market consumption of lactoferrin is in Japan and on my last trip I met with Morinaga’s senior managing director Dr Tomita. He is convinced of the benefits of lactoferrin – he takes capsules every day – and says he will never die of cancer, only old age. He looks pretty old already and is in excellent shape, so it seems to be working!

I mentioned earlier that this facility will not only give us the capability to produce lactoferrin but also other high-value milk components or fractions. A likely candidate is lactoperoxidase, a fraction that has known anti-infective and preservative properties. As you might imagine, the potential applications for such an ingredient are many and varied. And as we continue to uncover more new and novel fractions, we will be able to further utilize the capability of this plant. So watch this space.

I’d like to take this opportunity to acknowledge some of the project highlights and thank those who made it happen.

The speed at which it has happened is quite remarkable from putting a proposal to the Board, getting Board approval without any firm orders, researching and trialling the technology to make a best in class product - right through to design, building and commissioning the plant.

It has been completed on time, in spec and under budget, all in the space of just 12 months. This is a best class result.

So what has made the difference?

It comes down to people – everyone’s commitment, enthusiasm and above all the teamwork which has been evident from day one. It started at the top with the strong backing of Jay Waldvogel and the leadership team and is a great example of how a diverse group of people can work together to make something happen.

It’s not possible to thank everyone by name but I can’t let this occasion pass without mentioning the fantastic effort by Project Manager Rob Boswell and Karla Ward, senior product development technologist and her colleagues here at Hautapu, who worked on the process and design.

I also want to thank David Packer, Ross McCowan, Scott Missen and their teams who managed the design, construction, commissioning and handover, as well as members of my own team, including Heather Bain.

Greg Fahey and his team from Delta Process and the sub contractors such as Babbage and Murdochs have completed an excellent job of work as well.

And where would we be without customers? I’d like to acknowledge Michelle Cheng from Taiwan who has achieved our first sale.

Today, is the start of a new story for Fonterra in adding value to our shareholders’ milk through the development of innovative, specialty products that attract a premium in the market.

Thank you.

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