The formula that will take an ASX-listed dairy giant to the next level
Written on the 30 May 2019 by David Simmons
Listed dairy farmer Australian Dairy Nutritionals (ADN, ASX: AHF) is poised to watch its business take off.
The company is on the cusp of becoming a fully fledged player in the lucrative infant formula space, pending the relocation and launch of an offshore plant it agreed to acquire last month.
Due diligence has now been completed on the operation to relocate the plant which includes a dryer, evaporator and blending equipment capable of producing up to 600,000 tins of formula per annum.
The plant has previously produced and exported infant formula into China and its unnamed offshore seller is offloading the asset in order to upgrade.
ADN expects the plant will arrive in Australia in July and the acquisition will be settled in August.
Once the relocation is complete, ADN will begin manufacturing and distributing infant formula which includes production of skim and whole milk powders such as sheep, goat, and camel milk.
ADN's process to become an infant formula producer and integrated milk company began in earnest back in March 2017.
"This is a major milestone in the Group's strategy to become one of Australia's first vertically integrated manufacturers of organic infant formula," says ADN.
"The purchase of an existing operational plant will accelerate the Group's entry into the organic infant formula market in a sensible staged manner without the initial, much higher capital cost and longer construction lead time of a large dryer with higher capacity."
"The Group is heavily focussed on its strategy to shift away from production of conventional white milk to concentrate on value added own brands and premium dairy products and the purchase of this plant is a key part of the execution of this strategy."
"Furthermore, the Board believes the Group's provenance story will be particularly attractive to consumers as milk will be sourced from the Group's own organic farms in Western Victoria and processed just half an hour away at the Group's own processing facility in Camperdown."
Business News Australia
Author: David Simmons