Fonterra starts consultation on two new South Island milk driers

Fonterra Co-operative Group [NZX: FCG], the world's biggest dairy exporter, has begun a consultation process prior to lodging consent applications to build two new high-efficiency milk powder driers at its Studholme site in South Canterbury.

The Auckland-based dairy company said the proposed investment would add about 9 million litres of capacity to its milk processing in South Canterbury, one of the country's fastest-growing dairy regions.

Fonterra managing director global operations Robert Spurway said a budget hadn’t been worked out for the proposed plants at this early stage but the first one would be similar in size to one it has just started building in Lichfield in south Waikato which will cost just under $400 million. Dusseldorf-based GEA has been appointed to build the Lichfield drier which will rival Fonterra’s Darfield one, the world's largest pumping out 700 million tonnes of milk powder per day.

Spurway said community feedback on the proposed Studholme driers would be considered before the final design was completed and he expected resource consents to be lodged early next year. If the expansion is approved, construction could begin on the first drier within the next five years, followed by the potential installation of a second drier within the next 10 years.

Minimising the environmental impacts will be a high priority for the build with plans including a range of wastewater treatment options given the proximity of the Wainono lagoon to the site. Fonterra is also working to reduce the coal use and investigating options for energy efficient boilers capable of burning biomass.

“As with any build of this scale, local employment would be one of the major winners. With each new drier our site and tanker staff would grow by around 125 new positions, with builders and contractors to complete the build factored in on top of that," Spurway said.

Fonterra announced in August it was spending $555 million on expanding its processing facilities to cope with increased global demand and rising milk volumes in New Zealand.

Spurway said the new driers would handle milk from the south Canterbury area. South Island milk volumes had risen by 6 percent recently but that growth was expected to fall off in coming years which could impact the timing of the building of the driers, he said.

Units in the Fonterra Shareholders' Fund, which gives investors exposure to Fonterra's earnings stream, fell 0.3 percent to $6.16 today, and have gained 6.6 percent this year.

(BusinessDesk)