Japfa ties up with European dairy firm to develop US$200m plant in China

AGRI-FOOD firm Japfa Ltd and Europe-based dairy and milk processing company Food Union Group have tied up to build, own and operate a US$200-million premium milk processing plant in Shandong Province, China.

The joint venture is between Japfa's 61.87 per cent-owned subsidiary, AustAsia Investment Holdings (AIH), and Food Union, said Japfa in a statement.

AIH will invest up to US$20 million in stages for a 10 per cent stake in the milk processing plant which will manufacture high value-added dairy products, while Food Union will hold the remaining 90 per cent stake in the joint venture.

Food Union is the largest dairy company in Latvia and one of the biggest food producers in the Baltics with an annual combined turnover of around US$200 million in 2014.

The plant, which processes some 300,000 metric tonnes of milk and is located five kilometres from AIH's dairy farms in Dongying city, Shandong Province, is expected to commence operations in the first quarter of 2017.

Subject to market conditions, the plant will require 200 to 300 metric tonnes of raw milk per day in the first 12 months of operations, after which production will be ramped up progressively to full capacity in the ensuing two to three years.

Under the arrangement, AIH will enter into a long term (five-year renewable) off-take contract to supply premium raw milk to the plant. It could potentially supply up to 900 metric tonnes of raw milk per day, when the plant's production is fully ramped up.