Mataura Valley Milk chief executive Bernard May said that in June the company’s board had appointed Macquarie Capital and DG Advisory Limited to facilitate the strategic investor process, which was the next stage of its business strategy.
May said the process was expected to take several months to complete.
The company, which is backed by Chinese state-owned enterprise China Animal Husbandry Group, New Zealand company Bodco Ltd and local and farmer shareholders, officially opened its $226 million plant in November 2018.
Its financial report for the 12 months ending December 31, 2018 says: “the company requires additional funding to continue operating. Current projections indicate the company will exhaust its existing bank facilities in September 2019, and needs an additional $12 million in funding over the period through to 31 May 2020.”
The financial statement says the company has a letter of shareholder financial support from China Animal Husbandry Group, valid for a period of 13 months from May 27, 2019, to provide financial support the company to pay its debts as and when they were due.
In March, the company entered into a working capital agreement with The Hongkong and Shanghai Banking Corporation Limited (HSBC) for an additional $30m of working capital funding, the financial statement says.
May said as an early stage business, the business plan expected to make losses in the initial years as the business grew.
“We have now been producing for 12 months and have sold over 19,000 MT of product that has exceeded customer quality standards. We expect the business to be strongly profitable as we build production over the next few years.”
The company, which currently employs 83 staff, is forecasting to pay its farmers $0.40 – $0.50 per kgMS above other processors this current season.
The financial report says that on May 23, 2019, Fonterra updated its milk price forecast to a range of $6.30 to $6.40 per kg milksolids.
“Assuming a mid point of $6.35 and the company’s targeted premium of 20 cents, this would result in an increase in the company’s [Mataura Valley Milk’s] milk price estimate from $6.35 to $6.55 per kg milksolids, being an additional cost of $685,194.”
May said the company had paid its farmers for last season.
“We will be processing 35 per cent more milk this season than last season. This exceeded our initial forecast for milk and additional silos and tanker bay were required. Processing additional milk means we make a return on the additional $5m of capital required for the expansion.”
In June, the company signed an agreement with the Gore District Council confirming its financial contribution to the community earmarked for the town’s library. At that time the council said it would receive $958,000 in total, with payments spread during four years.
However, minutes of an ordinary meeting of the council held in committee on June 25, which Stuff obtained under the Local Government Official Information Act, show that deal had changed.
The minutes says “following several discussions with the general manager of MVM and a meeting on 17 June, a package was agreed to between the chief executive [council chief executive Steve Parry] and the general manager, [MVM general manager Bernard May] subject to approval by the council.” The package was a slight variation on what had been previously approved.
The company would now pay a total financial contribution of $950,000, instead of $1 million, with annual payments of $200,000 to commence from August 1, 2021, instead of August 1, 2020. The final payment of $150,000 would be due in August 2025 rather than in August 2024.