Invercargill Processing Plant sold to Chinese Interests

Media Release

29 January 2015

Blue River Dairy Sells Invercargill Processing Plant to Chinese Interests

New Zealand’s leading sheep milk powder producer, Blue River Dairy, has sold its Nith Street, Invercargill processing plant to Blueriver (HK) Nutrition Company Limited (hereinafter referred to as ‘Blueriver Nutrition HK’) for an undisclosed sum.

The deal is effective from 1 February and no jobs will be lost at the plant. Conversely, significant new investment at the plant is planned by Blueriver Nutrition HK with the likely addition of a second drier and up to $40m in new development. This will likely create additional jobs in construction and production, both on-plant and on-farm, over the next five years.

Blueriver Nutrition HK will continue to process Blue River milk as part of the sale with Blue River, who will concentrate on expanding its milk production on-farm to meet growing demand.

Beginning in 2003, Blue River has undertaken more than twelve years of research, farm conversion in Southland, dairy sheep breeding and marketing of award-winning sheep milk, fresh and powder, cheese and ice cream. Asia is its core market.

The company has successfully converted three Southland sheep farms to sheep dairying, producing around 1,000 tonnes of sheep milk powder annually from 20,000 ewes, which Blue River wants to grow to 100,000 ewes over the next few years, eventually producing more than 5,000 tonnes of sheep milk powder.

“Blue River has a proven record of providing sheep dairy products year round and we now want to step up to the next stage in our development,” Blue River founder director Keith Neylon says.

“Significant expansion of commercial sheep dairying on Southland farms is likely from this arrangement as we are now able to fully concentrate on milk production and let Blueriver Nutrition HK focus on the finished product.”

Blueriver Nutrition HK CEO, Mr Chen, says that the combination of Blue River’s recognised expertise in sheep milk production and his company’s marketing networks across Asia, “create a ‘best in class’ operation that will be at full stretch to meet market demand”.

“Bulk sheep milk powder prices have risen more than 50% over the past three years to $13,000 per tonne which highlights international market pressures. Our company adds significant value to the bulk powder, manufacturing finished goods that are recognised for their health benefits by discerning Asian families.”

Mr Neylon said the expansion of sheep milking in Southland combined with meat and wool production could help underpin killing capacity, “large scale sheep dairying provides a logical extension to traditional sheep farming.

“While this move is a small step, it has a significant overall benefit and benchmark for the sheep industry and comes with significantly higher rate of return potential than further expansion of the bovine dairy industry.

“Sheep dairying is seen as complementary to New Zealand’s traditional cow dairy farming. It can be conducted on land not suitable for dairy cows and is more compatible with the environment. Conversion of an existing sheep farm to include sheep dairying requires less capital outlay than converting to dairy cows,” says Mr Neylon.

“As well as Asia, sheep dairy products have significant export potential to Middle Eastern countries where sheep milk is the historical source of dairy products but where demand exceeds supply. Demand is also growing in North American markets.”

Sheep milk is denser than cow’s milk with more solids resulting in greater cheese production per litre. It is more easily digested by humans, particularly those with an intolerance or allergy to cows’ milk.

Overseas Investment Commission approval is not required for the sale of the plant to Blueriver Nutrition HK.

ENDS

Background for sheep-spotters

• Blue River Dairy provides a successful, proven, fully operational model for expansion of sheep milking operations to a larger production scale.

• Based on current market prices, improved lambing rates and frequency of lambing, sheep dairy/meat returns for a medium sized property could be up to three times the current gross returns for a traditional sheep farm – after a lead-in period to full production of dairy potential of three years to milk twice per day for 300 days, yielding 1.5 to 4.0 litres of milk per ewe per day.

• Over a period of twelve years, Blue River, under the leadership of Keith Neylon, has invested heavily in research to ensure the development of a specialised dairy sheep stock genetically suited to New Zealand conditions. The breeding stock began with the most common and productive breed of dairy sheep in the world, the East Friesian.

• Blue River Dairy has been using innovative technology for electronically tracking the productivity of sheep dairy farming within its three sophisticated milking sheds.

• The technical expertise developed by Blue River Dairy is highly regarded internationally

• Sheep have been raised for milk worldwide for thousands of years and were milked before cows. While China is the largest producer of sheep milk, the world’s commercial dairy sheep industry is concentrated in Europe and the countries on or near the Mediterranean Sea.

• Worldwide, most sheep are milked seasonally by hand. This is because many dairy sheep are raised in remote areas. Commercial sheep dairying operations like Blue River Dairy use sophisticated technology within milking sheds.

• Sheep milk, which can be made into cheese, powder, yoghurt and ice cream, is highly nutritious and richer in vitamins A, B and E, calcium, phosphorus, potassium and magnesium than cow’s milk.

• It contains a higher proportion of short and medium chain fatty acids, which have recognised health benefits relative to long chain fatty acids. For example, short chain fatty acids have little effect on cholesterol levels, and make milk easier to digest.

• Sheep milk has a higher solids content than goat or cow milk and contains no A1 casein.

• More cheese can be produced from a litre of sheep milk than a litre of goat or cow milk. Sheep milk yields 18 to 25 per cent cheese, whereas goat and cow milk yield 9 to 10 per cent.

• A typical lactation cycle for sheep is approximately 180 days. Ewes can be lambed three times over a two-year period which produces lambs outside of the usual peak lambing season. Lambs can either be grown through to prime weights on the farm or sold as stores. An appropriate management system has the potential to produce the same number of meat lambs while also milking the ewes.

• Sheep can be milked as efficiently and more quickly (per animal) than cows.

• A major learning from New Zealand’s leading sheep dairying business, Blue River Dairy, is that sheep dairying has the potential to transform the business model for farming sheep.

• Sheep dairying remains environmentally neutral as stocking rates do not change materially from current sheep farming practices.

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