Young farming and processing firm Australian Dairy Farms (ADF) is gaining market momentum in what is turning into a busy year for the listed business.
Last week ADF signed an agreement with its primary Chinese customer to jointly build a new fresh milk processing and export facility in Victoria.
The company has also just sealed a distribution deal for its Camperdown Dairy yoghurt and butter products to sell in independent supermarkets and grocery outlets in southern NSW and Victoria.
Brisbane-based ADF listed on the Australian Securities Exchange two years ago, buying six Victorian dairy farming properties.
However, its share price has wallowed around 20 cents for much of this year after sliding from highs around $3.50 a share soon after listing.
In April ADF Group bought the Camperdown Dairy Company (CDC) in Victoria’s Western District for $11 million.
CDC is already one of handful of Australian milk processors granted special “rapid transit” import licences by Chinese regulators for fresh milk sales to retail outlets in China.
The process typically takes about four days, although on occasions milk collected from local farms in South West Victoria has been processed, packed and landed on supermarket shelves in Shanghai within 65 hours.
The new domestic product distribution deal is through the 45-year-old Sunraysia region fruit juice business Lencia, which distributes widely across Victoria and the NSW Riverina.
CDC is also seeking other distribution options.
The Camperdown factory already produces milk, butter and yoghurt to Victorian Woolworths, Coles and IGA supermarkets and has a home delivery contract for products with Aussie Farmers Direct.
During the September quarter the ADF Group recorded $4.84 million in sales.
Although its new fresh milk processing site plans are still subject to a final feasibility sign off, the joint investment proposal with Australian Lian He Limited involves building the new plant on ADF land, funded by the Chinese customer.
The new joint entity is proposed to be held 40 per cent owned by ADF and 60pc by Australian Lian.
The expanded milk export plans follow close behind the Chinese-owned Van Diemen’s Land farming group in Tasmania announcing its intention to fly up to10 million litres a year of fresh milk processed by Lion to China, starting in early 2017.
NSW’s Norco Co-operative led the way with fresh milk exports flying to China in 2013, with other players to follow including A2 Milk, Jonesy’s Dairy and South Australian Dairy Farmers Association (SADA).
Australian Lian, based in Melbourne, is CDC’s longest and most reliable export customer to China.
Established in 2009 by a Chinese resident of Australia, it exports and distributes a range of Australian food and predominantly dairy products sold through a network of more than 3000 outlets in China.
Australian Lian’s exports include several brands of infant and follow-on formula.
The joint investment proposal involves building a plant capable of producing high quality fresh milk to maximize shelf life.
ADF Group’s chief executive officer, Peter Skene, said the new joint venture would fit perfectly with the group’s capability to be flexible and nimble in its processing business operations and its focus on the higher value end of the milk product market.
Modern technology would bottle fresh milk at world class standards to maximise shelf life.
“We have seen first-hand, how seriously Australian Lian takes this obligation,” Mr Skene said.
“The Melbourne based general manager drives three hours to Camperdown every Monday to supervise the processing and packaging of the export shipments, then follows the delivery truck to Tullamarine Airport to ensure there are no delays loading onto the aircraft.
“They then have local Chinese employees in China meet and monitor the shipment to ensure there are no delays in getting to the final retail outlets on time.
“It’s a big commitment to quality and safety and we are very comfortable moving into this space with Australian Lian.”
He said the size and capacity of the proposed new plant were small by industry standards, however, it would have substantial capacity for the fresh milk export market now and into future.
“This will open the way to additional export markets ensuring greater product and business security.”