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Fonterra and Toll Sign 20-year Rail Agreement

11 November 2004

Fonterra and Toll Sign 20-year Rail Agreement

Fonterra Co-operative Group and Toll New Zealand today announced a 20-year agreement that will make rail the primary mode of transporting dairy products from the Waikato region.

The agreement is the latest initiative from an on-going review by Fonterra of its national logistics operations. It includes plans by the company to build and operate a 50,000 metric tonne dry store at a Toll-managed freight village to be built at Hamilton.

Fonterra General Manager Logistics Nigel Jones says Fonterra is continually reviewing its logistics to identify the most efficient and cost-effective way of transporting its dairy products.

Mr Jones says the new initiative reflects Fonterra's increased confidence in the country's rail network since Toll took over rail operations and the Government acquired the tracks.

Toll NZ Chief Executive David Jackson says the agreement is typical of the partnerships Toll seeks.

"It is an opportunity to co-invest capital in a long-term project that delivers value to stakeholders and will also have a significant influence on the efficiency and growth of rail in New Zealand," he says.

Fonterra will link freight operations at its Te Awamutu, Morrinsville, Waitoa, Hautapu, Waharoa, Lichfield and Tirau manufacturing sites by rail to the new freight village.

The Co-operative's Te Rapa and Canpac operations will also be serviced through the site, with Te Rapa product being trucked to the freight village for transfer to rail.

Establishing this network involves reopening a rail link between Morrinsville and Waitoa, the first new piece of track commissioned in 14 years, says Mr Jackson.

Increasing traffic congestion on roads to the ports of Auckland and Tauranga made rail a competitive, sustainable, long-term transport option.

"Our agreement with Toll will eventually cut approximately 45,000 truck movements from Waikato roads and the main highways between the Waikato, Auckland, and Tauranga," Mr Jones says.

"It allows us to streamline our logistics operations and will contribute to our continuing competitiveness as a low-cost producer of dairy products."

Mr Jackson says when Toll took over operating the rail network just over a year ago, Fonterra was one of the first companies it spoke to.

"Through the efforts of many people we have now reached agreement on a concept that will reshape and enhance Fonterra's distribution methods."

Both Fonterra and Toll acknowledge New Zealand Railways Corporation's active support of the initiative.

Mr Jones says that, as track owner, the Corporation's cooperation was crucial to the agreement's going ahead.

Mr Jones says the initiative is part of Fonterra's aim to develop a port-neutral operation in the upper North Island.

"This allows us to work with our key strategic ocean-freight partners to further reduce total supply chain costs.

"With our reliance on shipping it's vital we're able to reduce port and service costs given the current environment that sees costs trending upwards, the result of a tightening supply in ship and container capacity globally".

Mr Jones says Fonterra will be working closely with the ports of Auckland and Tauranga and key ocean carriers as part of its ongoing logistics review.

ENDS

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