Have your say: Natural Dairy slams Fonterra and 'hysterical xenophobic' reactions to Chinese investment
8th Apr 10, 9:46am
Natural Dairy, the Hong Kong listed company aiming to invest in New Zealand's dairy industry, has issued a detailed rebuttal of claims by Fonterra and others, arguing the reaction to the prospect of Chinese investment in the industry was "hysterical and xenophobic". Natural Dairy said it planned to build a UHT milk packing plant and a baby formula plant in the North Island, both of which would employ New Zealanders and add more value to milk than Fonterra's own operations. Fonterra argued on Wednesday that foreign investors who planned to buy into New Zealand's dairy industry would not serve New Zealand farmers' interests in the long run and would add little value. It also argued it needed to change its capital structure to reduce the risk that competitors could help fund their own start ups by buying dairy farms and selling Fonterra shares. Natural Dairy also said it had been approached by farmers wanting to leave Fonterra and sell to Natural Dairy. Here is the full statement below from May Wang and Natural Dairy directors Ngataga Love and Keith Rushbrook.
New Zealanders, particularly dairy farmers, needed to wake up to the huge economic benefits being offered by Natural Dairy (NZ) Holdings Ltd’s plans to invest up to $1.5 billion in the New Zealand dairy industry and they must not be deceived by a well orchestrated public relations campaign by vested interests that are determined to stop this investment. Currently, at the request of the OIO, Natural Dairy (NZ) Holdings Ltd is revising its business plan so as to best illustrate the benefits of its application to purchase 29 dairy farms in the North Island (previously owned by Crafar family interests). It also plans to acquire or, if necessary build, at an expected cost of around $30 million, a dairy plant in the North Island to make UHT Long Life milk products for export. The aim is to provide New Zealand’s first truly vertically integrated company covering farm production and marketing. If the OIO approves this application, the medium term plans for Natural Dairy are to acquire more dairy farms in the North and South Island and acquire or construct a dairy plant suitable for the manufacture of infant formula (the plant could cost around $100 million). Natural Dairy is currently raising capital of up to $1.5 billion, primarily in Asia, to achieve this goal (subject to the relevant OIO approvals). To give some perspective, the entire NZ$1.5 billion dollar Natural Dairy deal would involve an extremely small percentage of New Zealand’s total dairy farm assets, estimated to be at least $67 billion. The Crafar purchase that is before the OIO involves just 20,000 cows versus the total national herd of 5.5 million cows. This is not a “Chinese take-over of the New Zealand dairy industry” as some hysterically suggest. Unfortunately Natural Dairy’s interest in the New Zealand dairy industry has met a xenophobic response from some farming interests completely at odds with reality. In a recent Dominion Post article one farmer was quoted as saying, “They (Natural Dairy) will bring in their own labour, pay them $5 an hour and sell the dairy products for a third of the price in China”. This assertion is completely false. Natural Dairy (NZ) Holdings Ltd is committed to: * An entirely New Zealand workforce of farm managers, sharemilkers, farm workers and production workers at New Zealand rates of pay and under New Zealand employment law. * New Zealanders will also considerably benefit in employment terms from the flow on effects through related industries servicing the farms. * Natural Dairy has a commitment to work alongside and make use of New Zealand education streams to gain the best of this country’s innovations in the dairy industry. Unlike Fonterra which does not encourage sharemilking or run training programmes on farms from which it buys milk. * Natural Dairy (NZ) Holdings Ltd farms would use Fonterra benchmarks of price, forex and production and therefore would not undercut its other New Zealand competitors. However, its value added products may command higher prices in China and therefore it will be able to pay more for its milk supply in New Zealand, which is no doubt a commercial worry for Fonterra. * Natural Dairy farms will be subject to all New Zealand standards and regulations involved in the supply and production of dairy products. * Indeed, one of the principle reasons Natural Dairy decided to locate here in this country was the benefit implied in having the “Made in New Zealand” label on its products (despite the melamine scandal involving a Fonterra related company in China, New Zealand milk products enjoy a good reputation). Natural Dairy wants the advantage of abiding by New Zealand’s high quality food safety regulations. * Natural Dairy farms will be subject to New Zealand standards of animal care and welfare. This will include rigid adherence to environmental standards and requirements. * Indeed, these standards will be enforced to a higher level on Natural Dairy owned farms as, unlike Fonterra which does not act on mismanagement by farmers of their land or animals, Natural Dairy as owners of the farms has a statutory obligation to do so. * Unlike Fonterra, Natural Dairy intends to add value to its export milk products, creating long life milk and infant formula as well as just milk powder. This will add value to the New Zealand economy. This week Fonterra chairman Sir Henry van der Heyden urged farmers to take any concerns they had about Natural Dairy’s plans to the government and the Overseas Investment Office. Fonterra are clearly worried about the potential competition posed by Natural Dairy’s plans and oppose New Zealand farmers gaining a greater choice in who they may supply or sell their farms to. Sir Henry van der Heyden, says he is taking ten calls a day from farmers wanting to know why Fonterra is not buying the Crafar farms. If that is the case can Sir Henry explain why Natural Dairy and its solicitors are taking at least ten calls a day from farmers wishing to sell their farms to Natural Dairy? If Fonterra is not willing to purchase New Zealand dairy farms and it is not willing to help farmers pay their bank debts, why is it opposed to those farmers being able to realise a fair price for their land from a company such as Natural Dairy? Natural Dairy (NZ) Holdings Ltd, related companies and some of the principals involved have been subjected to a concerted and well orchestrated campaign of denigration ever since the company began exploring the prospect of buying into the New Zealand dairy industry. While May Wang, who heads the company that is currently purchasing land on behalf of Natural Dairy, has had some previous business difficulties (which are in the process of being resolved and a proposal put to the creditors involved) Natural Dairy (NZ) Holdings Ltd is a separate entity backed by reputable large scale investors, primarily from the Asian region. It should be noted that May Wang is just one of three New Zealand directors involved in the project, the others being Sir Ngatata Love and Auckland accountant Keith Rushbrook. New Zealand has a Free Trade Agreement with China and recently signed a Dairy Agreement there. It should be recognised that free trade is “a two way street” and if New Zealand based dairy interests can take advantage of the China market, so Chinese related investment has a right to put vitally needed capital into New Zealand without impediment from vested interests and the hysterical xenophobic reactions from some prejudiced quarters. May Wang is currently in Asia assisting in raising further capital for this venture (subject to OIO approval of the original purchase) and will not be available for interviews until her return in approximately two weeks time.Your view? We welcome your comments and insights below.