New Image seeks investment to expand infant formula plant

New Image Group seeks investment to expand infant formula manufacturing

By Fiona Rotherham

Nov. 23 (BusinessDesk) - NIG Nutritionals, the manufacturing arm of nutritional and health marketer New Image Group, is seeking to sell up to half the company to raise money to expand its infant formula manufacturing, following strong demand from China and wider Asian markets.

NIGN is currently a wholly owned subsidiary of the formerly listed and Auckland-based New Image Group, which is majority owned by Graeme Clegg and trusts associated with him.

It has appointed PwC to manage the capital raising process and is seeking investment of at least $10 million, though a planned manufacturing expansion will cost more than that.

NIGN director Alan Stewart said the percentage of shareholding available to an investor is open to negotiation up to 50 percent and the company was looking for a shareholder that would help build the business.

“That is more likely to be an offshore investor, most likely from China, but there are also locally-based companies that deal with China,” he said.

Stewart said the company had experienced a 25 percent increase in the past year for infant formula products, which accounted for 36 percent of its $35.4 million revenue for the year to June 30. Whole and skim milk powder accounted for a quarter of revenue, 10 percent came from nutritional and wellness products, and 29 percent from contract manufacturing for the parent group's subsidiary, New Image International.

The biggest increase in its infant formula sales came from its goat milk-based brand, Baby Steps, Stewart said. China’s policy change from allowing people to have two rather than just one child is also expected to fuel demand.

The company claims Chinese consumers, in particular, are turning to goat rather than cow’s milk because it is the closest to human milk and can generally be better tolerated and digested more easily.

However NIGN is constrained by what the spray drier at its Paerata plant, near Pukekohe, can handle. The multi-million dollar plant was constructed four years ago.

The proposed expansion would increase its capacity for goat milk four-fold and it’s also looking to consolidate its Avondale blending and packing plant into the Paerata operation, Stewart said.

The company has two goat suppliers, including south Auckland-based Oete Farms, and Stewart said it has had interest from others wanting to supply, including dairy farmers considering converting part of their operation because of the current higher payout for goat milk. But NIGN would first look to expand what it takes from current suppliers who are looking to increase their flocks, he said.

(BusinessDesk)

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