Posts Tagged ‘infant formula’

Meat exports sold to more than 100 countries

May 30, 2017

New Zealand’s meat exporters come in for a lot of criticism, either for selling too cheaply or for not adding value, and certainly because they can’t (or don’t) pay farmers enough for their livestock. This final criticism is presumably a direct result of the first two – the prosecution’s case argues if they sold product at a higher price or added more value, they would automatically be able to pay more for livestock. (more…)

Silver Fern receives an offer it can’t refuse

September 30, 2015

No wonder the deal between Silver Fern farms and Shanghai Mailing took so long to conclude, but from all appearances it was worth waiting for. Not that you would necessarily think so, if you read about the disappointment of some shareholders and the MIE group about the board’s unwillingness to give serious consideration to an alternative farmer offer of $40 million or some of the business commentary. (more…)

The botulism scare that wasn’t

August 28, 2013

So Fonterra’s botulism contamination problem wasn’t a problem after all according to the tests conducted by the Ministry for Primary Industries. It is most unfortunate that Fonterra got it so wrong that it felt the need to wear a hair shirt and submit itself, not to mention its own management, the government and the country as a whole, to the worst public relations disaster imaginable.

 

The original tests were carried out by AgResearch which still stands by its test results, but according to MPI’s tests by global experts, the whey protein contained a different gene from the Clostridium botulinum.

 

MPI took it seriously, the government took it seriously, Gary Romano fell on his sword and two managers have been dismissed. China was completely spooked by the prospect of infant deaths, while Russia and Sri Lanka have discovered an opportunity to place bans, temporary or otherwise, on New Zealand dairy production.

 

Infant formula manufacturers will have suffered untold damage to their businesses, from image, financial and future sales perspectives.

 

The damage to our image abroad has been incalculable. When newspapers all over the world take delight in writing headlines such as ‘100% Manure’ and question our right to promote our tourism industry on the back of our clean, green environment, one wonders whether we can ever recover from this single mistake.

 

The answer is that we will in time, but perhaps nobody will ever really believe the 100% Pure claim again, even if it was never meant to be taken literally.

 

Having said that, the recent spate of food safety problems, among them the apparent discovery of traces of chemicals which weren’t there, is not all that surprising when one thinks about it.

 

New   Zealand’s exports are massively weighted towards agriculturally based food products, all of which have the potential to pose more or less serious food safety issues. This is why MPI’s inspection regime is so comprehensive, although the dairy production problems may suggest to an outside observer that the systems in place are not as failsafe as they should be.

 

Only a couple of days ago Greens spokesperson, Stefan Browning, has called for MPI to stop the practice of allowing meat companies to carry out some of their own inspection procedures and revert to all meat inspection having to be performed by AsureQuality’s meat inspectors. Browning said the meat industry is potentially a comparable risk to the dairy industry.

 

Therefore it’s a great relief that the systems didn’t actually fail in the case of Fonterra’s dirty pipes. Someone who ought to know told me more than a week ago that there would be no traces of Clostridium botulinum found in the whey protein, so it all appears to have been a big fuss about nothing very much.

 

However there is a question as to whether all food safety has suddenly been compromised by a fall in standards caused by devolving responsibility to the companies which produce or process the food products. There is no evidence of a sudden drop in standards in spite of recent events, although conspiracy theorists will assume that independent Government employed inspection has been compromised by companies being allowed to inspect their own products.

 

In this case it was a test by AgResearch, a Crown Research Institute, that provoked the contamination scare, although presumably the product had already been cleared by Fonterra’s in house testing laboratory.

 

In the dairy industry there are 49 Approved Recognised Agencies including both independent testing agencies and company owned laboratories. This latest chain of events does not necessarily invalidate this testing structure.

 

There would appear to be potentially a long queue of people and organisations looking for compensation, including dismissed managers, infant formula manufacturers whose businesses have been undermined, Tourism New Zealand whose brand has been dragged through spilt milk powder and all those businesses which depend on our international reputation.

 

It is ironic that Fonterra has just announced its highest ever payout to farmers which will of course be great for the economy, but that might not be enough to compensate for the damage caused by the company’s PR disaster.

Synlait well structured for a successful future

July 2, 2013

Synlait Milk’s $120 million capital raising will enable the company to restructure debt and invest in several new initiatives, including a lactoferrin plant, a third dryer, a butter plant, testing laboratory and dry store. The share offer is made up of $75 million of new capital and $45 million sell down by some of the exiting shareholders.

 

All the signs point to this capital raising being a success, unlike the attempt to raise $150 million in 2009 which was shunned by New Zealand investors.

 

Much has changed in four years. The New Zealand economy is now on a substantially stronger footing, Synlait has put runs on the board and a Chinese company, Bright Dairy, was willing to invest $82 million in the business. Synlait is well structured to avoid the angst about overseas investment because majority locally owned Synlait Ltd owns the farms separately from the milk business, with Japanese company Mitsui the minority shareholder.

 

This structure ensures there is no argument about the sale of New Zealand land to foreign investors which was such a large feature of the Crafar farms purchase by Peng Xin. It has ensured that Synlait is well placed to take advantage of the fast growing Chinese demand for infant milk formula as well as being exposed to other growth markets. The new capital investment programme will enable Synlait to move swiftly into higher growth products than its present bias towards whole and skimmed milk powder.

 

Synlait is obviously much smaller than Fonterra, but it is now in a position to offer public investors, both New Zealand and overseas, the chance to invest in our agricultural sector. There haven’t been too many opportunities to do this, let alone in the added value end of the market.

 

There seems to be a pattern here. Local entrepreneurs start up a new business which fails to attract New Zealand investment and, consequently, overseas capital is the default option. Alternatively a New Zealand company, for instance PGG Wrightson and F&P Appliances, needs external capital to ride out tough conditions and has to find it overseas.

 

In the case of companies that have got into trouble, the overseas investor soon takes control. But in Synlait’s case a good business model has made it possible to retain a strong New Zealand involvement. We might have preferred 100% ownership, but the events of 2009 made that impossible, and what we have now got is committed shareholding by a Chinese company which will assist expansion ambitions.

 

In my view Synlait meets all the criteria for overseas investment.