Olam subsidiary expands dairy in Uruguay

NEW ZEALAND Farming Systems Uruguay (NZFSU), a wholly owned dairy farming subsidiary of Olam International Limited, will be investing $80 million to set up a dairy processing facility in the central region of Uruguay, near the NZFSU farm site.  

The new plant, which goes into operation by 2017, will not only integrate Olam’s dairy supply chain but bring out the maximum capacity of NZFSU’s dairy farming operation by leveraging its global trading and distribution network.  Its production capacity will be 600,000 litres per day to one million litres of milk per day.

“The proposed dairy processing investment is part of our strategy for NZFSU to realise the full value of dairy farming, said Vivek Verma , Olam managing director and global head for Dairy, Coffee and Commodity Financial Services. “The processing plant will be uniquely positioned and differentiated with the control on milk supply through captive milk production and well-placed to meet our customers’ call for high quality dairy products with complete traceability and stringent food safety standards.”

The new plant will manufacture whole milk powder, skim milk powder and butter, which will be marketed to China, Russia, Middle East, Eastern Europe and Africa.  Shipments will also reach Brazil, Paraguay and Venezuela.

A boon to Uruguay’ dairy

“Our Dairy business had restructured its supply chain operations as well as optimised its balance sheet, freeing up resources to focus on margin accretive projects.  In time to come, if we execute this well, the expansion of NZFSU into midstream processing will be a prized integrated farming and processing model that will truly leverage Uruguay’s comparative advantages and unlock the full intrinsic value of the assets we have built in this business,”  said A. Shekhar, Olam’s executive director of Finance and Business Development.

Strong

Olam’s senior vice president and regional head for South America M. Sathyamurthy said, “This investment signifies our continued commitment to Uruguay’s dairy sector.  In particular, we would also become one of the largest employers in the sector, supporting the growth in export revenues of this country.”

About $5 million of the investment will be allocated for the purchase of a 94.0% stake in BG Industria Láctea S.A., a company based in Uruguay, in order to acquire the land, licences and permits required for the construction of the plant.